Comcast nears 250k quarterly churn, but profit appeases investors

Comcast was first out of the races with third quarter results among the US big hitters, so with no AT&T, Dish Network, Altice USA or Charter Communications to compare it with, where does the cable TV giant stand?

To no great shock, the answer is certainly not on sturdy ground as far as cable TV is concerned. Comcast experienced another sharp video subscriber decline in Q3, losing 238,000 subscribers to bring its footprint abruptly down to 24.1 million, adding to the hefty 224,000 subs loss in Q2.

At approaching a quarter of a million cord cutters a quarter, Comcast is on track to churn out enough subs to slide below 20 million by 2023. At the current downward curve and with its NBCUniversal streaming service set to launch in April 2020, realistically that could occur much sooner.

Comcast’s silver lining is that AT&T is guaranteed to steal all the headlines come Monday when its own set of Q3 financials are due out.

As a result, video revenue was down 0.9% at Comcast, a picture which would have been much worse were it not for employing rate adjustments. But, like video nemesis Netflix last week, profitability was the star of the show as net income inflated 11.5% to $3.2 billion. That should keep investors happy, which is more than can be said for AT&T shareholders.

While net income starred, high-speed internet was again the success story of the quarter in subscriber terms, as Comcast gained 379,000 signatures to close in on 28.2 million broadband customers. This pushed high-speed internet revenue up by 9.3% to $4.7 billion in Q3, from total cable communications revenue of $14.6 billion, up 4%.

Given the blistering pace of Xfinity internet uptake and sustained disappointment in the video business, Comcast recently launched an interesting new marketing strategy. Right at the tail end of Q3, Comcast began giving away free Xfinity Flex set tops to internet-only subscribers with xFi gateways in a bid to introduce cord cutters and cord nevers to its streaming video offerings, like Xfinity Instant TV, as well as its premium channels, alongside third party applications. Flex supports 4K and includes integrated search, much like popular connected TV devices like Roku, which is why Roku’s share price plummeted 14% as of market close yesterday.

Fourth quarter results should provide some idea of how this new offering has panned out, although cushioning Comcast’s cable TV decline is a tall order.

Meanwhile, Comcast’s wireless division won standout revenue performer for Q3, rocketing 38.1% to $326 million, from total group revenue which came in at $26.8 billion, growing 21.2% year on year.

Over in Europe, Sky performed strongly with content revenue up 15.4% to $315 million from total $4.6 billion revenue, but saw its direct to consumer relationships slide for the first time, down marginally at 2% to 23.9 million. This will be a small cause for concern but unfortunately, since the acquisition, Comcast has frustratingly refused to break out Sky subscriber figures.

Plummeting advertising revenues across the board is a serious issue for Comcast to address – with Sky’s down 13.8% to $446 million and Comcast Cable’s down 11.9% to $603 billion. The operator’s response has been to bulk up its ad tech arsenal and bring Sky’s revered AdSmart technology in-house.

More recently, Comcast accused Google of waving privacy concerns to hinder its video ad arm FreeWheel from selling ads on YouTube – firing a warning shot to Google that it won’t stand for such anti-competitive practices where its beloved video is concerned.

Given the current climate, Comcast will be wary of engaging Google in a full throttle lawsuit, initially sending out a rallying cry instead. Comcast called for technology companies to pool resources together, according to Reuters sources, with the supposedly harmless aim of “discussing” Google’s stranglehold and the threat this poses to online video advertising.

Again, Comcast highlighted viewership over subscriber numbers to cover its tracks. Sky channels recorded a 10% increase in household viewership, while NBC ranked in the top spot for primetime viewing for the sixth consecutive season. But what’s the use unless you can translate that it cold, hard cash? Broadcast revenue decreased 9.1% to $2.2 billion during the third quarter as advertising and content licensing revenue slumped by 12.1% and 17% respectively. Notably, Comcast cut off Starz only last week and replaced it with the premium network Epix on certain Xfinity TV packages, aimed at helping Comcast manage programming costs.

Unfortunately, Comcast’s earnings call was held just as Faultline went to press, so we’ll revisit the musings of CEO Brian Roberts and his executive team next week with our usual scrutiny.