Comcast Hedges Cable Bets With NBCU
If the TV ad market has been underperforming of late, content licensing is still big business.
Specifically for NBCUniversal LLC , retransmission agreements are generating $500 million in revenue this year. And CEO Steve Burke thinks that number is below what other broadcasters are receiving, giving the network room to grow in the years to come.
The ownership of NBCUniversal offers Comcast Corp. (Nasdaq: CMCSA, CMCSK) a good counterbalance to threats in the video services business. Higher programming costs might be a negative for cable companies overall, but for Comcast, the additional revenue from NBCU helps to ease the pain. Or as Burke puts it, "We're nicely hedged."
Speaking at the 2015 Media, Communications & Entertainment Conference, Burke also pointed out that while cable networks used to hail the dual-revenue business model -- i.e. revenue from advertising and licensing fees -- that paradigm has shifted to include even more sources of income now. NBCU, for example, can count on revenue from affiliate fees, subscription video-on-demand services and international sales.
Even on the advertising side, where news has been negative of late, Burke is optimistic. "I think right now the advertising market is very strong," he said.
During a weak upfront season, analysts questioned whether advertisers were converting more of their dollars to digital, or just biding their time. According to Burke, the answer seems to be the latter, and now the laggards are paying a higher price.
"I think the advertisers that did jump [at upfront sales] are feeling smart that they did."
Beyond advertising, Burke also outlined NBCU's thinking behind its recent investments in several online content companies.
"We need to get better in terms of taking our existing video content and bringing it directly to consumers via the Internet," Burke noted. That's something the network believes Buzzfeed, Vox, Vice and Huffington Post do well, and why it decided to invest hundreds of millions of dollars in those video properties. (See Comcast's NBC Invests $200M in Vox Media and NBCUniversal Invests $200M in BuzzFeed.)
"The real reason why we did it is to get smarter," said Burke.
Both NBCU and parent company Comcast have plenty of reason to work on upping their game. Media markets continue to fragment, and competitors in the distribution business are evolving rapidly. Comcast has plenty of assets on both sides, but it's also got the likes of Apple Inc. (Nasdaq: AAPL) and Verizon Communications Inc. (NYSE: VZ) fighting for the same consumer audiences. And the same consumer dollars. (See A Peek at What's Behind Comcast's Momentum, Apple Brings tvOS to Apple TV and Verizon Kicks Off Go90 Private Beta .)
— Mari Silbey, Senior Editor, Cable/Video, Light Reading