By Shalini Ramachandran
Comcast Corp. is forestalling the cord-cutting trend.
The nation's largest cable company added video customers in the
fourth quarter, capping off its best year in almost a decade as
cable providers gain market share in a contracting pay-TV
market.
Comcast added 89,000 video customers in the quarter,
contributing to a boost in revenue and profit. In all of 2015, the
company only lost 36,000 video customers, its best result in nine
years.
Comcast was able to, at least for now, defy the industry logic
that cord-cutters are increasingly abandoning pay TV. It has been
investing in customer service and in its set-top box and guide,
which it says encourages customers to watch more TV and makes them
less likely to cancel service.
In an interview, Comcast Chief Executive Brian Roberts said he
hopes to "continue the trend" in TV customers this year. "We need
to keep that pace going because it's never been more
competitive."
Comcast's results illustrate the comeback of cable operators,
who for years lost video subscribers to satellite and phone
companies but have lately clawed back some market share. Cable
companies are benefiting from investments in their cable-TV
products and bundling those alongside fast broadband, as well as
offering cheaper, slimmed-down packages of channels for more
cost-conscious consumers. Last week, Time Warner Cable said it
added net video subscribers last year for the first time since
2006.
Part of cable's success is due to the weakening of its fiercest
competitors, satellite and phone companies. The rising importance
of broadband and on-demand TV to customers has favored the cable
companies, since it is difficult technologically for satellite to
provide those services.
"I think the pendulum does tend to swing," Mr. Roberts said.
"There was a time others had high-definition TV and we didn't, and
there was no interactivity and no video-on-demand. Fortunately, we
made investments and we bet right."
Phone companies entered the TV business about a decade ago but
their overall growth was largely driven by wireless and other
businesses. Verizon Communications Inc. has sold off parts of its
FiOS footprint, while AT&T Inc. has de-emphasized its U-Verse
TV offering in favor of its newly acquired satellite operator
DirecTV. But the 214,000 satellite customers AT&T added in the
fourth quarter didn't offset the 240,000 U-Verse television
subscribers it shed. Verizon's FiOS TV additions also slowed in the
most recent quarter, to 20,000 from 116,000 a year earlier.
"Amidst pay TV's worst year ever, cable just enjoyed its best
year in the past decade," MoffettNathanson analyst Craig Moffett
said. Cable's strength is "real and very likely sustainable," he
said.
Fears of cord-cutting swept through the media industry last year
amid evidence that the total number of households paying for
traditional TV service is declining. Pay-TV providers are fighting
for customers as people "cut the cord" and opt for cheaper,
skinnier packages. Mr. Moffett estimates total U.S. pay-TV
subscribers are contracting at a rate of 0.9% a year.
Despite those fears, Comcast said 75% of its new video customers
in the fourth quarter signed up for big TV packages. The big bundle
is "going to continue to be a very good business for a long time,"
said NBCUniversal CEO Steve Burke, who oversees the company's TV
networks.
Comcast has been investing in video over the past several years,
even as others in the industry have played down cable TV's
importance in comparison to broadband.
Since 2010, Comcast has hired more than 650 software engineers
to create a transformed video experience, and those efforts led to
the X1 Internet-connected set-top box and guide, a sleeker
alternative to the clunky cable guides of the past that allows for
fast, Web-like updates and an easy way to watch TV on-demand. The
company now employs more than 1,000 software engineers--a marked
change from its analog cable television roots.
Mr. Roberts also credited Comcast's recent investments in
customer service for helping to retain customers. The company last
year budgeted $300 million to turning around its customer
operations, including building an Uber-like app to allow customers
to track and rate their technicians, after some embarrassing
episodes of poor customer interactions went viral.
But given the broader trends, Comcast is seriously exploring a
new growth opportunity in wireless. Comcast said it plans to file
to participate in the coming government auction of wireless
spectrum, which will enable the cable operator to potentially buy
wireless airwaves to be used for offering mobile service.
"We are going to evaluate, consider and may purchase, but only
if we consider the price is right," Chief Financial Officer Michael
Cavanagh said on the earnings call.
Shares of Comcast, down 13% over the past three months through
Tuesday, rose 6% to $57.84 on Wednesday as the company also
announced plans to increase its dividend and its stock-buyback
plan.
Comcast's fourth-quarter profit grew 2.4% to $1.97 billion, or
79 cents a share, up from $1.93 billion, or 74 cents a share, a
year ago. Revenue rose 8.5% to $19.2 billion. Both revenue and
adjusted earnings topped analysts' estimates.
Comcast's broadband and business-services divisions posted
strong revenue growth in the fourth quarter, offsetting softness in
the voice and cable advertising units. At the cable business, which
accounts for the bulk of the top line at Comcast, revenue rose 5.9%
to $11.98 billion.
The cable giant added 460,000 broadband customers in the quarter
compared with 375,000 a year earlier. Voice customer additions grew
to 139,000, compared with 123,000.
At NBCUniversal, revenue was bolstered by growth at the filmed
entertainment and theme parks divisions.
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com
(END) Dow Jones Newswires
February 03, 2016 20:50 ET (01:50 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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