Comcast’s Q1 Numbers Clearly Show the Future Is Broadband

– And Comcast Knows It

The future of TV is clearly seen in one set of quarterly numbers from Comcast, the world’s largest pay TV service: The future is broadband delivered content as attested to by the fact that for the first time, the total number of Comcast’s broadband subscribers – 22.369 million – is about the same as its pay TV subscribers – 22.375 million. During the current quarter, broadband subscribers are expected to exceed pay TV subscribers.

The company added 407,000 broadband subscribers in the prior quarter but lost 8,000 pay TV subscribers.

In revenue, the numbers are reversed. Comcast’s pay TV revenue for the quarter was $5.3 billion while its broadband revenue was $3 billion. However, offsetting the higher pay TV revenue is the cost of acquiring content, which some have estimated as high as 80% or more of revenue. There are no content costs in broadband because the OTT services provide it without any costs charged to broadband service providers, whose financial obligations are to build and maintain a reliable network. That is something they are already doing so the actual network cost can probably be prorated 50/50.

Neil Smit Comcast

Comcast CEO, Cable, Neil Smit believes broadband subscriber numbers can still grow

 

Comcast said its 10% increase in earnings in the first quarter was largely due to its broadband business, another indication of broadband’s profitability. Comcast’s cable group stressed the increasing importance of its broadband business. Revenue in the unit increased to $11.4 billion in the quarter, up 6.3% compared with the same period last year.

In the end, pay TV companies, except satcos, will be measured on how well they do at broadband – number of subscribers, available bandwidth speed, percentage of passed homes with its highest speeds, customer satisfaction, reliability (uptime and consistent speeds) and such. At that, Comcast and most cablecos and all-fiber services are doing very well indeed.

Comcast’s CEO for cable operations Neil Smit said there are more opportunities for growth in broadband. He said, “We believe we’re increasing share, and the market is growing,” he said. The company is using broadband as a way to get its foot in the door and it then sells broadband subscribers other services.

Comcast’s 22 plus million broadband subscribers make it the US’ largest broadband service. AT&T and the other copper-wire based telcos must wonder how they let the wireline broadband market slip away from them – although most of them excel in cellular services. That is another area in which the cablecos are eyeing and are in the process of building a nationwide network of Wi-Fi hotspots that are free to their broadband subscribers. If the cablecos can successfully do that, cellcos will be forced to radically change their business models – and not to their financial well-being.

Comcast lost its recent bid to acquire Time Warner Cable, whose subscribers badly needed Comcast’s pay TV and broadband technology. Comcast has moved on. Its CEO, Brian Roberts, said that Comcast’s top priorities now are to advance its existing business and improve its customer service. Roberts said the company has no plans to expand its US footprint, enlarge its international businesses or expand into the traditional cellular market.

Roberts said, “We’re always open-minded. We’ve always been, however, I think extremely disciplined and focused on building shareholder value. And right now, we’re back to work and there’s nothing that I could think of that we don’t have on our plate that I’m excited about.”

And the most exciting one for Comcast must be …

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