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Comcast Finds Sweet Spot With X1

Alan Breznick
4/22/2014

Comcast appears to have recaptured its old video mojo, thanks largely to its new X1 IP video gateways.

In another upbeat earnings call Tuesday morning, Comcast Corp. (Nasdaq: CMCSA, CMCSK) reported that it gained 24,000 video subscribers in the first quarter as it continued to deploy the X1 hybrid QAM/IP video gateways aggressively throughout its regions. That gain, reversing a loss of 25,000 video customers in the first quarter of last year, was the second straight quarterly increase for the largest US MSO after a losing streak of 26 consecutive quarters over the past seven years. (See Comcast Breaks Video Sub Skid.)

Comcast executives gave most of the credit to the X1, which gives subscribers a cloud-based user interface that offers a stark improvement over the legacy set-top box interface. The X1, now deployed in all Comcast systems, has helped cut the voluntary customer churn rate by 20-30% while boosting video viewing rates and on-demand, transactional, and advertising revenue, the executives said.

Calling the X1 "a game changer," Comcast chairman and CEO Brian Roberts said it "creates a really fantastic opportunity" to increase customer satisfaction, develop new services, and generate fresh revenue. "It's an architectural change that we haven't seen in a long time."

Delighted by the reception that the X1 has received from more than 7 million triple-play customers, Comcast officials said they're also offering the service to double-play customers. They have also stepped up deployments of the video gateways, installing an average of 15,000-20,000 boxes a day, double the rate of six months ago.

In another video highlight from the earnings report, Comcast said it increased the number of subscribers taking such advanced video services as HD and DVRs to 12.6 million. That represents 56% of its total 22.6 million video customers, versus 53% of the base a year earlier.

Yet Comcast still has more than 200,000 fewer video customers than it did a year ago, due to the heavy subscriber losses it endured last spring and summer. Its video totals are looking up again, but the company still faces an uphill climb to reclaim all the TV subscribers it has lost since 2007.

Weighed down by heavy video subscriber losses in 2013, when it shed more than 300,000 basic cable customers, Comcast barely eked out a year-over-year increase in video revenue for the first quarter. Video revenue climbed a mere 1.3% to nearly $5.2 billion as modest price increases more than offset the subscriber losses.

Overall revenue from Comcast's huge cable communications division rose 5.3% to almost $10.8 billion, due mainly to robust growth in the high-speed data, advertising, and business services sectors. In particular, business services kept up its stunning growth, surging nearly 24% to a record $917 million. At that pace, Comcast could become the first cable operator to eclipse the $4 billion annual commercial services revenue mark this year.

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

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smkinoshita
smkinoshita
4/22/2014 | 6:32:59 PM
Re: Basic cable
@danielcawrey:  "One thing that Comcast is surely doing well in is providing broadband, especially business class. Almost every business today needs internet, and Comcast makes a ton of margin on selling upper tier internet services, primarily for use during workdays. "

I think you've hit the main point, Daniel.  Internet is becoming as standard as a phone number, and some businesses are oprating virtually to save on costs.  
Carol Wilson
Carol Wilson
4/22/2014 | 5:56:53 PM
Re: Basic cable
Didn't some of the video subs go to the telcos? Not a ton but some. 

I suspect most have gone to online viewing in response to ever-higher cable costs. 
danielcawrey
danielcawrey
4/22/2014 | 2:53:26 PM
Basic cable
I wonder where all of those basic cable customers are going? Sure, some of them are getting Netflix or Hulu, but are some of them switching to satellite?

One thing that Comcast is surely doing well in is providing broadband, especially business class. Almost every business today needs internet, and Comcast makes a ton of margin on selling upper tier internet services, primarily for use during workdays. 
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