On July 28th, Comcast Corporation released its quarterly financial report. A quick summary shows:
- Revenue up, but 265,000 subscribers lost.
- Sales up, but net income down $83 million.
- Advertising revenue increasing 23 percent from one year earlier
- Expenses for obtaining program content increasing abut 7 percent in the quarter
- Added 118,000 high-speed Internet customers, 82 percent more than last year
- While at the same time, the loss of 265,000 cable TV subscribers.
So income at Comcast is rising, even while it's traditional core business model continues to drop. A huge leap in advertising revenue, but a slow but steady rise in expenses for obtaining content for their cable operations.
Now we need to ask, where is this going here? And what does Comcast see as the juicy center hidden deep within this Comcast takeover of NBC-Universal?
Some analysts say it's sports holdings. Sports is huge in cable. Disney owns ESPN, it brings in more revenue than ABC, which the Mouse also owns. NBC Sports with their NFL games and future Olympics coverage might be a huge plum.
Others say it's territorial. The big land grab now over, every town and municipality's already wired for cable … outside of new home construction. Uh, well, there's a growth industry!
And still others insist the effort to acquire NBC-Universal is merely image and ego, that after all these years as a simple common carrier, Comcast wants to be know as more than just “a big dumb pipe”.
But perhaps the truth of the matter is that there's a real juicy nougat center hidden in the NBC-U, a tasty core that could permanently reverse the cost of content acquisition, while guaranteeing income from advertising revenues to rise without stopping. What is it?
What it is – all these other cable channels you sometimes watch, like SciFy, Discovery, HGTV, Food Network … that's where the money is. And what about Hulu? NBC owns 32 percent of this cable buster – at least, until Comcast buys out the Peacock.
Comcast all but admits this. Because Comcast pays big carriage fees to have these channels on their system. And NBC-Universal is a partner in a huge bunch of these same cable programming channels … Weather Channel, Bravo, Oxygen, Syfy, Telemundo, USA Network ... the list goes on and on.
The ad revenue stream for these programming channels is enormous. For present partners-in-the-profit NBC Cable Holdings, there's profit far and away more than the income from NBC's network. And what if a few of these leading cable networks should, for some reason, elect to retire the wire and seek other means of distribution to the viewers? What kind of plum would it be for, say, the Discovery Channel to abandon cable's ship, and sign a carriage deal with, oh, I don't know … perhaps DISH Network?
So, this NBC-Universal deal, at it's heart, is really about taking over control of a vast number of popular content channels on cable. And content is king. By doing this, Comcast can reverse the cash flow of having to pay to carry -- and instead pocket those former costs as new profit. Plus, own all the income from ad time bought on all those networks.
I think Comcast sees a way to have their cake, and eat it, too.
What could foul this corporate cakewalk? More on that in a future posting.
Jim Furrer
Original Audio Content by Jim Furrer is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.
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