Comcast Coasts on X1, Data, Business Services
Continuing to battle the tide in the pay-TV market, Comcast cut its video subscriber losses steeply in the third quarter as it accelerated rollout of its next-gen IP video platform and related video products. But Comcast continues to lose video subscribers.
In another generally strong earnings performance that saw its cable operations revenue climb 5.2% to $11 billion and overall revenue rise 4% to $16.8 billion, Comcast Corp. (Nasdaq: CMCSA, CMCSK) reported Thursday morning that it lost 81,000 video subscribers in the third quarter. While that loss doesn't sound very good, it's actually down 36% from its loss of 127,000 subs a year ago and represents the MSO's best third-quarter performance on the video front since 2007. The company closed out September with 22.4 million video subs, maintaining its status as the largest pay-TV provider in North America.
As they have for the past several quarters, Comcast executives credited the improving video results to the popularity of their next-gen X1 platform, an IP-based video home gateway solution that has enabled them to introduce a cloud-based user interface, network DVR service, video streaming to mobile devices and other advanced products and features to their video customers. On the earnings call, executives boasted that they have now deployed 5 million X1 set-top boxes across the US, covering a decent chunk of their 22 million-plus households. (See Comcast Cloud DVR Takes Flight.)
Comcast executives said the X1, launched in spring 2012, has helped the giant US MSO chop its video subscriber losses (and even gain video subs two quarters ago) and boost video revenues over the last two and a half years by reducing its customer churn rate, increasing VoD and DVR use and stoking linear TV viewing. Comcast, which started out by offering X1 to its triple-play (or highest-paying) subs, has since extended it to at least some of its double-play customers as well.
Comcast Vice Chairman & CFO Michael Angelakis said the MSO is getting a "pretty darn good return on that investment on X1." Calling the platform a "game-changer" for the MSO, Comcast Chairman & CEO Brian Roberts went even further. "It's a complicated process to get it in the home and working perfectly, but once it's there, it's fantastic," he said.
Like nearly all other major US cable operators, though, Comcast still continues to bleed video subs, albeit at a reduced rate, due mainly to ever-rising fiber-fed competition from such major telcos as AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ). Angelakis noted that the two telcos have added 2.5 million homes passed to their collective FiOS and U-verse footprints over the past 12 months, a period in which Comcast has shed about 150,000 video customers.
On the broadband side, Comcast posted even more obviously impressive results. The MSO added 315,000 broadband subscribers, up from 297,000 in the year-ago period and the company's best third-quarter results in five years. As a result, broadband was the company's biggest contributor to revenue growth and Comcast ended the quarter with a total of 21.6 million high-speed data customers, by far the most in North America.
Comcast also enjoyed strong WiFi gains again, extending its ambitious network of hotspots to 5 million throughout the US, mainly through home hotspots with dual-band wireless gateways. Company executives said more than 50% of their broadband customers now have the powerful WiFi gateways their homes. Plans call for Comcast to deploy 8 million hotspots by the end of the year
But, like their counterparts at other major MSOs, Comcast executives have not figured out how to make much money off their growing WiFi networks. Asked about the concept of a "WiFi First" strategy, Comcast Cable President & CEO Neil Smith called WiFi "a very powerful asset" but said the company hasn't determined how to monetize it yet.
In another milestone, Comcast reported that it scaled $1 billion in business services revenues in the third quarter, up 22% from $836 million in the year-ago period. Not surprisingly, then, business services was the second-biggest contributor to the company's revenue growth in the quarter.
As a result, Comcast has become the first cable operator to reach that height. With this latest gain, Comcast is on track to approach $4 billion in commercial revenues for the year, just four years after it, Time Warner Cable Inc. (NYSE: TWC) and Cox Communications Inc. all cleared the $1 billion mark for annual commercial revenues for the first time.
— Alan Breznick, Cable/Video Practice Leader, Light Reading