Comcast reported its first quarter earnings recently. The company added 407,000 high speed internet subscribers to take its subscriber tally to 22.37 million subscribers at the end of the quarter. However, the company lost 8,000 pay-TV subscribers in the quarter, which was a reversal from the 24,000 subscribers it gained in the same period a year ago. This result underscores the changing complexion of Comcast’s business. Even though the company made its name in the past selling cable services, it is the high speed internet segment that is leading the growth charge in recent years.
NBCUniversal’s revenues declined 4% in comparison to the year ago period, when it benefited from the 2014 Sochi Winter Olympics. Excluding the 2014 Sochi Olympics and 2015 Super Bowl, NBCUniversal grew 8% for the quarter. NBCU has been an important growth driver for the company in the recent past and we believe that this segment will continue to benefit from the continued success of its cable and broadcasting networks, filmed studio and theme parks.
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High Speed Internet Segment Continues To Impress
The high speed internet business has done well for Comcast on rising demand for faster Internet and a decline of DSL Internet connections. From 13 million subscribers in 2007, Comcast’s high speed internet subscriber base increased to 22.37 million by the end of Q1 2015. The high speed internet business generated revenues of $3.04 billion in Q1 2015, 11% higher than the year ago period. We expect that high speed internet revenue will continue to increase as the U.S. high speed data market is growing rapidly, driven by an improving economy and growing need for higher speed and connectivity.
High speed Internet has remained the leading growth factor for the cable companies for quite some time now. There is a boom in demand for broadband in the U.S., due to a growing need for speed and connectivity. The use of multiple devices and the higher penetration of smartphones are boosting the overall demand for high-speed Internet. Smartphone penetration has seen rapid growth from 54% in December 2012 to nearly 75% in December 2014. Internet video, video-on-demand and online gaming account for the majority of Internet traffic in the U.S. Video streaming, for instance, requires high data volumes, which explains why the reliance on fixed networks is far greater than that on mobile carriers.
NBCUniversal Feels Effects Of Last Year’s Winter Olympics
According to our estimates, NBCU contributes around 32% to Comcast’s value and includes the cable and broadcasting networks, theme parks and the movie business. NBCU reported revenues of $6.6 billion in Q1 2015, a 4% decline compared to Q1 2014. NBCU had benefited from the broadcast of the Sochi Winter Olympics last year and the lack of a similar global event in 2015 hurt revenues. Excluding the effect of Sochi Olympics, NBCU grew 8% for the quarter and its broadcasting network segment grew 5.5%. NBCU’s broadcasting network NBC has been riding high on the success of its programming. NBC ended the 2013-14 season at the top spot in 18-49 demographics and remained no.1 during the first three months of 2015. The network has benefited from the success of its shows such as The Voice, Chicago PDandThe Blacklist, which delivered high ratings during the quarter. (Related – Comcast’s NBC: More Hits Than Misses In The First Quarter Of 2015) Ratings directly impact the advertisement income for content owners and NBC derives 70% of its revenues from advertising income.