How Much Revenue Can Comcast Add Post The Acquisition Of Sky?

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Comcast Corp. (NASDAQ: CMCSA) has seen its total revenues grow by 17% from $80.7 billion in 2016 to $94.5 billion in 2018. Revenue is expected to increase to $108.8 billion in 2019 and further to $113 billion by 2020, with the Sky division (acquired by Comcast in late 2018) contributing the most to this revenue base expansion.

Takeaway

  • Comcast’s Sky business, which is based in Europe and makes revenues by operating video, high-speed internet, voice and wireless phone services, and also running the Sky News broadcast network and Sky Sports networks, is expected to contribute $18.5 billion to Comcast’s projected revenue of $108.8 billion for 2019.
  • The Sky business, which Comcast acquired in late 2018, is a new addition to Comcast’s revenue divisions and is expected to contribute 17% of the company’s total revenue.
  • Comcast’s Sky business is likely to provide $13.9 billion, that is 97% of the $14.3 billion in total revenue the company is expected to add in 2019.
  • This expected healthy revenue growth due to the acquisition has been key to Comcast’s 27% price appreciation in 2019, further helped by improving margins. We discuss Comcast’s valuation analysis in full, separately.
  • Our interactive dashboard Comcast Revenues: How Does Comcast Make Money? discusses Comcast’s business model, followed by sections that review past performance and 2020 expectations for Comcast’s revenue drivers, including segment-wise revenue performance, and competitive comparisons with Disney and Verizon.

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Comcast’s Business Model

What Does It Offer?

Comcast is a communications and media conglomerate, that operates cable communications networks and has media interests that include cable and broadcast TV networks, film, and media production.

Has 3 Operating Segments

  • Comcast Cable: Comcast cable is one of the largest providers of high-speed internet, video, and voice services in the United States. The company sells to residential customers under the Xfinity brand.
  • NBCUniversal: Includes media operations such as cable networks, broadcast television, filmed entertainment, and theme parks.
  • Sky: Based in Europe, Sky operates video, high-speed internet, voice and wireless phone services, and also runs the Sky News broadcast network and Sky Sports networks.

Competition?

Comcast’s primary competitors include Dish Network, Walt Dinsey, Charter, AT&T, and Verizon.

Segment-wise Revenue Performance

Sky

  • Sky, which is one of Europe’s leading entertainment companies with 23.6 million retail customers as of FY 2018, was acquired by Comcast in Q4 2018.
  • The newly added division helped Comcast add $4.6 billion to its revenue base in 2018 (with only 1 quarter in operation).
  • However, with 2019 being the first full year post the consolidation, we expect the segment revenues to grow almost 4x to $18.5 billion in 2019, followed by a further rise to $19 billion by 2020.
  • Along with the lower base effect, revenue growth is expected to be driven by sharp growth in Sky’s content revenue.
  • Content revenue is expected to grow by over 20% in 2019 followed by healthy growth in 2020 as well, reflecting the monetization of a slate of original programming and the wholesaling of sports programming, including exclusive sports rights recently acquired in Italy and Germany.
  • Additionally, Sky’s direct-to-consumer business is expected to grow by 2020, led by increases in customer relationships.
  • The division is expected to increase its contribution to Comcast’s total revenues from 5% in 2018 to 17% in 2019 and 2020, being the largest revenue growth driver for the company.

Cable Communication

Cable Communication business is the largest division of the company, contributing over 50% of total revenues. To understand how Comcast’s biggest segment is expected to perform going forward, view our dashboard analysis.

NBCUniversal

  • Revenues for the NBCUniversal segment expanded from $31.3 billion in 2016 to about $36 billion in 2018, driven by growth across all segments, especially the Cable Networks and Broadcast divisions.
  • However, we expect revenue to decrease to about $34.8 billion by 2020, due to lower broadcast revenue driven by decreases in advertising revenue resulting from broadcasts of the 2018 PyeongChang Olympics and the 2018 Super Bowl, which will be absent in the next 2 years.

To understand how Comcast’s revenue trend compares with its major peers, view our dashboard analysis.

 

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