Analysis Comcast numbers were largely deemed good by its management team on their results call, with a few noticeable holes. Firstly, despite an increase in video revenues, Comcast in fact lost 60,000 video customers in the quarter, a number which appears to be rising. Secondly, there was a major revenue fall in NBC broadcasting.
Another issue is that content costs rose 8.5 per cent, much of this down to new licences to allow the consumption of Xfinity (the cable TV, phone and internet package) on portable devices and the rest down to passing on price rises. Content rate increases will remain in double-digit growth for all of 2013, the company says.
Overall revenues were up five per cent, cash flow up seven per cent, and free cash flow was $3.1bn, certainly a record.
One of the big numbers for Comcast was the rise in video revenues and to us this is a bit of a mystery. Some 72 per cent of its US customers were given price increases. The revenues boost may be attributed to a transition by some users from single to double- and triple-play packages; a take-up of other package upgrades; an increase in DVR use; the purchase of additional adaptors; as well as transactional VoD increases.
Comcast and its ilk are driven to get as many percentage points out of customers as they can for their investors, but surely the higher this video average revenue per unit goes – it went up by 8 per cent this quarter to $155 – the more customers that will consider cutting the cord. To us that’s a mystery that should lead to Netflix-class offerings doing better and better, but equally we’re not sure what Comcast should do about it.
Video revenue growth was up 3.7 per cent ($184m) as a result of all this, the highest rate of growth in any quarter in the last four years. Today 76 per cent of video customers subscribe to at least two products, and 41 per cent subscribe to all three services.
And yet the price increases seem to be the reason for the high video losses, which Comcast execs said usually do not carry over into future quarters. In other words, you raise the prices, a few people drop off and then it’s status quo for the rest of the year.
High-speed internet was the largest contributor to cable revenue growth - up 9 per cent, with an additional 433,000 customers. Voice revenue was up 3 per cent with 211,000 new voice customers. Comcast said that margins were improved by an increase in self-installation to 38 per cent of new installations, compared to 24 per cent last year, and with 29 per cent of customers managing their accounts online.
The new X1 DVR, which offers a new UI, interactivity and apps, is now rolling out nationwide across the US, and is already in 30 per cent of the country, and will be in 50 per cent by the end of Q2. Also the Comcast Home product, which is an Xfinity product, offering home security, lighting control and energy management is rolling out nationwide, and Comcast says it is bringing new customers with it.
It is hard to imagine cutting the cord if you have Comcast triple play, a Verizon attached phone that plays Xfinity video from Comcast, and you use the service to watch out for your home as well. It would be too much of a wrench. Comcast said that 70 per cent Home customers take triple play or quad play.
One thing that is driving the uptake of Xfinity is something Comcast calls a Watch-a-thon, where it encourages a number of extra channels to open up on Xfinity for a week, and this drove hoards of people to mobile viewing and increased home TV viewing too. Its last watch-a-thon got 123 million views across all platforms.
And Streampix, its $5-a-month Netflix standoff product, continued to grow, although it did not give our numbers this time.
Comcast products are now in 500 Verizon stores, and about 1,000 agent stores, with a common billing system, and some new products lined up on a product roadmap, with details still sketchy, but which they confirmed would include High Speed Data and video on mobile phones.
Copyright © 2013, Faultline
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