By Shalini Ramachandran
In the face of cord-cutting and increased competition from
streaming services, Comcast Corp. managed to stem the loss of
cable-TV customers and reaffirmed its commitment to the video
business.
Comcast on Thursday reported that second-quarter profit rose
7.3% as the movie "Jurassic World" set box-office records and
revenue at the high-speed Internet and business-services divisions
grew, offsetting softness at the company's TV networks.
Comcast shed 69,000 cable TV customers in the seasonally weak
second quarter, an improvement from the 144,000 subscribers lost a
year ago. Comcast executives attributed the improvement to the
accelerated rollout of their next-generation X1 set-top box and
guide, as well as recent investments to improve customer service.
Chief Executive Brian Roberts said that Comcast is in talks with
several other operators, including Cox Communications and Shaw
Communications, to license its X1 product.
"We very much believe in the video business and our place in its
future, and we will strive to lead in innovating to match the
demands of our customers," Mr. Roberts said on a conference call
with analysts.
For the quarter ended June 30, Comcast reported net income of
$2.14 billion, or 84 cents a share, up from $1.99 billion, or 76
cents, a year earlier. Revenue grew 11% to $18.74 billion. Earnings
matched analysts' average estimate from Thomson Reuters, while
revenue topped expectations of $18.14 billion.
The cable giant has been refocusing after emerging in April from
14 months in limbo, when it walked away from the ill-fated $45
billion acquisition of Time Warner Cable because of stiff
regulatory resistance. Since then, Comcast has announced plans to
offer a new $15-a-month broadband video service dubbed "Stream" for
its Internet customers and started testing a videogame streaming
service over its set-top boxes in partnership with Electronic
Arts.
The company is trying to bolster its Internet offerings and
target younger consumers as more customers in the U.S. opt to cut
the cable TV cord in favor of cheaper video alternatives. In May,
Comcast Cable President Neil Smit said the company's Internet
subscribers had surpassed its video customers, a significant
milestone for a firm that grew up selling cable TV. As of June 30,
Comcast had 22.3 million video customers, compared with 22.5
million Internet customers.
Still, broadband customer growth slowed in the quarter as it
added 180,000 customers, compared with 203,000 a year earlier.
Comcast shares fell 2.4% to $62.93 in recent trading.
Broadband subscribers outnumber video subscribers, but the video
business still brings in far more revenue. Broadband revenue
increased 10% to $3.1 billion, while video sales rose 3.7% to $5.4
billion thanks to higher cable bills and more customers signing up
for advanced services.
Business services revenue jumped 20% to $1.2 billion, helping
offset a 2.1% decline in voice revenue. Overall at the cable
business--which includes video, broadband and voice connections and
accounts for the bulk of Comcast's top line--revenue rose 6.3% to
$11.73 billion.
At the cable networks division, NBCUniversal's biggest segment
by sales, revenue decreased 1% to $2.45 billion. Operating cash
flow, a measure of profitability, declined 4.6% amid continued
ratings pressure. Revenue at the broadcast-TV segment, which
includes the flagship NBC network, was flat, while its operating
cash flow declined 3.7%.
Television networks have spent the past few months negotiating
with advertisers to lock in ad-spending commitments for the coming
season. While any public comments about upfront ad sales are
notoriously full of posturing and fuzzy math, declines this year
are likely at least as bad as last year.
On the call, NBCUniversal Chief Executive Steve Burke said the
latest upfront was a "challenging time for the industry" but NBCU
networks gained market share even though "overall industry volume
was down."
For NBCUniversal, advertising revenue at its cable networks,
which include USA, Syfy and CNBC, fell 3% in the second quarter,
while broadcast ad revenue was relatively flat with the year
prior.
Total revenue at NBCUniversal shot up 20% to $7.23 billion,
following a blockbuster quarter at the filmed entertainment
division and continued growth at the theme parks, thanks to
Universal Orlando's "Harry Potter" Diagon Alley attraction.
Operating cash flow at NBCU increased 19%.
Hits like "Jurassic World," "Furious 7" and "Pitch Perfect 2"
helped operating cash flow at the filmed entertainment division
more than double to $422 million in the second quarter. "Jurassic
World" is now third on the list of biggest box-office hits, behind
only "Avatar" and "Titanic." Cash flow at the theme parks jumped
45% to $354 million in the quarter. Mr. Roberts said "Jurassic
World" generated $1 billion world-wide in the first 13 days of its
theater run, "faster than any film in history."
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com
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