After six years of leading the cable industry's charge in the business services space, Comcast is no longer the undisputed cable king of the commercial market.
As we projected earlier, Charter Communications Inc. is now giving Comcast Corp. (Nasdaq: CMCSA, CMCSK) a serious run for the commercial money after striking its twin deals to acquire Time Warner Cable and Bright House Networks last year. In its latest earnings report released earlier this month, Charter reported that it collected an impressive $1.38 billion in business services revenue for the third quarter, just slightly below the $1.40 billion reported by Comcast for the same period. Moreover, Charter reported that its pro forma commercial revenue for the first nine months of the year amounted to $4.02 billion, again just slightly below Comcast's nine-month total of $4.07 billion. (See Meet the New Charter.)
This means that both of the two biggest US MSOs should easily clear $5 billion in commercial revenue for the full year, becoming the first two cable companies to accomplish that feat. Combined, the two cable giants will likely account for nearly $11 billion in business services revenue, or more than two-thirds of the cable industry's entire total of close to $15 billion this year.
But what it also means is that Charter could soon eclipse Comcast as the nation's biggest cable commercial player even though Comcast is still a notably bigger company with much higher overall revenues and greater coverage of the US. That's because Charter, while smaller overall, now dominates the two biggest US metro areas, New York and Los Angeles, as well as such other key commercial markets as Dallas, Charlotte, Tampa, Orlando, Columbus, Cleveland and St. Louis. Comcast controls most, although not all, of the nation's other 25 largest markets.
Charter, a long-time commercial laggard that produced more than $1 billion in commercial revenue for the first time last year, is relying heavily on the former Time Warner Cable commercial operation to close the once-yawning revenue gap with Comcast. TWC, which had been the second biggest cable commercial player for at least the past decade, produced $3.3 billion in business services revenue last year. So it will likely account for at least $3.8 billion of Charter's total this year.
That helps explain why Phil Meeks, who headed Time Warner Cable's commercial services unit after years of running Cox Communications Inc. 's business services operation, is now in charge of Charter's Spectrum outfit. Meeks is one of the few former TWC division heads to be granted a division lead at Charter since the merger last spring.
Then there's Bright House, which largely rode the rise of Orlando and Tampa as commercial centers to become a sizable business services player. Based on last year's estimates, the legacy Bright House operation will likely contribute at least $500 million to Charter's commercial revenue total this year.
So it should make for interesting scorecard-keeping as Charter and Comcast battle it out for cable commercial king in the US over the next few years. We'll be discussing this and other developments in the commercial space at our tenth annual Future of Cable Business Services conference in New York tomorrow. Come join us at the Westin Times Square to find out more.
— Alan Breznick, Cable/Video Practice Leader, Light Reading