Comcast delivered third-quarter earnings that topped Wall Street expectations even as the cable arm posted a loss of 134,000 residential video subscribers and NBCUniversal faced tough year-over-year comps due to the 2016 summer Olympics.
On the cable systems side, a net gain of 214,000 high-speed internet customers helped drive a 5.1% gain in revenue to $13.2 billion. But the residential video drop of 134,000 customers continues the trend of traditional MVPD subscriber bleeding this quarter — a swing from this time last year when Comcast and other large providers posted modest gains in video subs.
The video losses underscore the fast-changing market for pay TV services. Comcast is facing pressure from all sides, from Netflix and other SVOD heavyweights to the fledgling digital MVPD offerings of Hulu and YouTube to more aggressive bundling and marketing efforts from traditional distributors a la DirecTV Now.
All of that heightened competition has spurred Comcast to focus on broadband service, rather than video, as the engine of growth for its cable arm. “Broadband is increasingly the epicenter of our relationship with customers,” Comcast chairman-CEO Brian Roberts said Thursday during the company’s earnings call with analysts.
On the video side, Comcast is pouring resources into enduring that its X1 operating system remains the most innovative in the industry in order to attract the most high-end video customers.
“We’ve anticipated this shift that’s coming,” Roberts said. Questions about the financials surrounding Comcast’s broadband business, and the impact of video losses, dominated the half-hour Q&A session.
Roberts emphasized that the importance of strong broadband service in the typical American household is only growing — which puts Comcast in good position. Even if customers don’t pay for Comcast’s video service, they’re relying on the company’s fat broadband pipe to access all of that streaming video from Netflix et al.
At present, the Philadelphia-based cable giant has 25 million broadband customers and 22 million video customers. Comcast projected that without the disruption of the storms that battered the Gulf Coast region and Florida, Comcast would have added 240,000 broadband customers in the quarter while its net video losses would have eased to 105,000.
“The utility of broadband to the consumer is going up every year,” Roberts said. “People are relying on the speed and the wifi coverage and the video — whether it’s our video or some other video. Consumption has never been higher. NBC gets paid for a lot of that video consumption in different ways.”
Comcast reported earnings of 55 cents per share, up 19.6% from the year-ago quarter. Analysts had been expecting around 49 cents per share. Total revenue dropped 1.6% to $20.98 billion while adjusted earnings were up 5% to $7.18 billion. Comcast executives cited the impact of the summer storm season on residential and business customers on the cable side.
Despite the high hurdle from year-over-year comparisons for NBCU, Comcast cited strong performances from the theme park wing, the theatrical release of “Despicable Me 3,” and content licensing gains across film and TV for powering NBCUniversal’s quarter.
NBCU generated revenue of $8 billion, down 12.7%, and earnings of $2.3 billion. Excluding the impact of the 2016 summer Olympics, earnings would have been up 20%.
NBCU’s cable networks wing and NBC’s broadcast unit both posted revenue decreases thanks to the Olympics effect. But content licensing was a bright spot for both, with the cable group posting a 24% gain to $283 million. NBC’s content licensing haul was up 20% to $440 million.
Roberts said the content licensing gains reflect the changing ways in which NBCU’s networks profit from the programming they deliver.
“Must-see content is more crucial now than ever,” Roberts said. “In the evolving media eco-system, great content is the foundation of everything.”
The film side also faced a high bar in the quarter after the success of “The Secret Life of Pets” and “Jason Bourne” in the comparable 2016 frame. But “Despicable Me 3” made a big contribution. And content licensing was also a windfall for the unit, growing 15%.
Roberts said Universal Pictures is on track to exceed the stellar 2015 results and make 2017 the most profitable year in the studio’s 105-year history, a feat he chalked up to “product leadership and financial discipline.”
(Pictured: “Despicable Me 3”)