Comcast: X1 Strong, No Need to Go OTT Today

While Comcast couldn't pull off another quarter of video subscriber growth in the traditionally weak Q2, the cable company still reported its best second-quarter results for its video business today in more than a decade. Acknowledging that feat, executives continued to heap praise on the X1 platform in the company earnings call, and CEO Brian Roberts asserted once again that Comcast has no need to extend video offerings outside its network footprint via an over-the-top service.

To be clear, Roberts isn't ruling out an OTT business model in the future. But he emphasized that Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s current strategy revolves around being able to offer multiple, high-value products and bundled services that limit customer churn. "It's not clear how you do that where you don't have a network," said Roberts.

Of note, Google Fiber Inc. 's head of network deployment and operations Chris Levendos memorably argued the opposite earlier this year, suggesting that the best way to scale a video business would be to use the OTT model, despite the fact that the Internet company is deploying franchise TV service today. (See Fiber TV First, but Google's Eyeing OTT.)

But then, Google Fiber doesn't have the network footprint that Comcast has, or ownership of a major broadcast network.

In the second quarter, Comcast lost 4,000 video subscribers compared to a loss of 69,000 subs in Q2 of 2015. Nearly 40% of video customers are now on the X1 platform, and Comcast has big plans to maximize that distribution around the Olympic Games with a blending of live broadcast content, online streaming and on-demand video.

Comcast also said it has now shipped 8 million voice remotes with its X1 service. And Comcast Cable CEO Neil Smit commented on the upcoming integration of Netflix into the X1 platform by saying that Comcast now has a chance to be "an aggregator of aggregators." (See Comcast Confirms Netflix Coming to X1.)

On the broadband side, Comcast once again added subscribers this quarter, bringing in 220,000 new Internet customers to add on to the 438,000 new Internet subs it acquired in Q1. In total, the company now has just shy of 24 million data customers, far outpacing its closest ISP fellow Charter Communications Inc. in the US, which has somewhere around 19.5 million data subs. (Note: Charter does not break out its total base of Internet subscribers each quarter, but Light Reading estimates are based on material submitted by Charter during its acquisition of Time Warner Cable and Bright House Networks, along with customer additions reported in Q1. See Comcast Can't Be Beat on Broadband.)

Total Comcast Cable revenues in Q2 were $12.4 billion, up from $12.2 billion in Q1, and $11.7 billion in the year-ago quarter.

Comcast wasn't able to shed any new light on its wireless strategy in the Q2 earnings call, largely because it's still in the middle of bidding on spectrum in the broadcast incentive auction, and the Federal Communications Commission (FCC) has imposed a gag rule on participants to avoid possible collusion. However, Smit reiterated that the company believes "wireless presents a significant opportunity for the business." (See Comcast Could Be Your Next Mobile Provider.)

Executives added a little more color on activity in Comcast's business services segment. The cable operator increased its business services revenue in the second quarter by 17% year-over-year to $1.4 billion. However, the rate of growth in the segment has slowed, dropping from yearly percentage increases of 18.7%, 19.5%, 20.3% and 17.5% in each of the last four quarters.

The vast majority of Comcast's commercial services revenue, 75%, still comes from small businesses. However, the cable company is actively pursuing larger enterprise deals and teaming up with fellow operators to address connectivity needs outside of its residential footprint. Comcast announced a major national deal with Wawa just prior to announcing its Q1 earnings in April. (See Comcast Brings Free WiFi to Wawa.)

In a hedge against its cable business, Comcast continues to build on its NBCUniversal LLC assets, bringing in segment revenue of $7.1 billion in the second quarter. That amount is higher than Q1 revenue of $6.9 billion, but lower than the $7.5 billion NBCU earned in Q2 of 2015. The decrease stems from the company's film business, which couldn't sustain the numbers it generated through the release of Furious 7 and Jurassic World last year.

In contrast, the NBCU broadcast television unit in particular performed well in the second quarter based on huge increases is content licensing (agreements with subscription-video-on-demand companies) and retransmission consent revenue.

Across all of its businesses, Comcast earned $19.3 billion in revenue for the second quarter, up from $19.8 billion in Q1 and $19 billion in Q2 of 2015. The company's share price rose close to a dollar to $68 per share on the news and is still hovering in that vicinity at the time of writing.

— Mari Silbey, Senior Editor, Cable/Video, Light Reading