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Comcast Breaks Video Sub Skid

Alan Breznick

Who cares about Time Warner Cable when you're adding video customers again?

Brushing aside press reports that it's negotiating with Charter Communications Inc. to divvy up Time Warner Cable Inc. (NYSE: TWC)'s cable systems, Comcast Corp. (Nasdaq: CMCSA, CMCSK) reported Tuesday morning that it gained 43,000 video subscribers in the fourth quarter. That marks the first time in nearly seven years that Comcast has added video customers in a quarter, ending a losing streak of 26 quarters. (See Comcast May Join Charter Team.)

Even with the fourth-quarter gain, Comcast lost 305,000 video customers for the year, continuing its annual downward trend to a total of 21.7 million. But that's still a 10% improvement; the company lost 336,000 video customers in 2012 and even more in prior years.

Delighted with the results, Comcast executives said they see a video turnaround gathering steam. They said the MSO improved its video results despite increased competition in its footprint from such fiber-fed telco services as AT&T Inc. (NYSE: T)'s U-verse.

"I think it'll take a while before we go positive for the year," Comcast Cable president and CEO Neil Smit said during an upbeat earnings call with financial analysts. "But we think we'll be competing well on both the fiber side and the satellite side."

As part of the video turnaround strategy, Comcast is counting heavily on its next-gen IP video platform, X1. With the cloud-based programming guide and user interface now rolled out throughout its footprint, the MSO is accelerating plans to offer X1 and later versions to more than half its video customers over the next few years. Currently, X1's availability is limited to triple-play subscribers and a few double-play subscribers.

"We're very pleased with the early customer feedback" on X1, Comcast vice chairman and CFO Michael Angelakis said during the call. Citing various company metrics, he and Smit said X1 subscribers are purchasing notably more video-on-demand titles and watching more on-demand programming than other video customers. They are signing up for DVR service and triple-play bundles more frequently than other video subs, and they are cutting the video cord less often.

Comcast officials are also speeding up plans to upgrade the growing X1 customer base to the more advanced X2 guide through a software download. Smit said all X1 customers will soon receive the software upgrade to X2, which enables more personalized search and navigation capabilities. (See Comcast Gears Up for X2 Push.)

Smit also confirmed press reports that Comcast is talking to Cox Communications Inc. about licensing the X1 guide to Cox for its use. Smit said the two companies are "exploring opportunities" for Cox to use components of X1 in its own next-gen programming guide.

Comcast officials have been seeking to offer a white-label version of X1 to other cable operators for a while. On the company's last earnings call in late October, Smit said a number of MSOs (which he would not name) had expressed interest in the idea. (See Comcast Spreads IP Video Love.)

Despite shedding more than 300,000 video subscribers for the year, Comcast reported video revenue increases because of across-the-board price hikes for video subscriptions and increased uptake of advanced services like HDTV and DVR. Video revenue rose 2.3% for the quarter to $5.1 billion and 2.9% for the year to $20.5 billion. Fourth-quarter monthly revenue per video sub climbed 6.8% from a year earlier to $164.

With 44% of video customers subscribing to three services (versus 40% previously), Comcast executives said they will keep the emphasis on generating more revenue from their best customers. "Going forward, we're very focused on high-value subscribers," Smit said.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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1/30/2014 | 11:23:41 PM
Break out the champagne
So they're breaking out the champagne in downtown Philly over this news. And it is a big deal. Now the question is whether it's a fluke or the beginning of a longer-term trend. Much will depend on the success of X1, X2, and their brethren. Are you betting for or against Comcast on this one?   
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