Finance

Comcast Ready to Join Sub Gain Club

Top cable operator could find itself in the black by year-end 10/24/2016 8:00 AM Eastern

Comcast is expected to reverse the trend of video customer losses in the third quarter, with analysts predicting it will end the year in positive territory, the first time the nation’s largest cable operator has flirted with that milestone in about a decade.

 

Comcast has been on track to finish the year with more video customers than it started with, adding 58,000 TV subscribers in the first quarter and losing just 4,000 in the second.

 

Positive growth has been a trend in the past year for the big cable operators. Charter Communications did it in 2015 with 11,000 video additions, as did Time Warner Cable (purchased by Charter in May 2016) with 32,000 additions. For both, it was the first year of positive video customer growth in more than a decade.

 

Q3 NUMBERS THIS WEEK

Now Comcast, which has toyed with full-year video subscriber growth in the past, is expected to join the party. Comcast has turned in several recent quarters in the black, but it hasn’t had a full-year of growth on the video side since 2006, when it posted a gain of about 100,000 customers.

 

That should change this year, according to several analysts, starting with the third quarter. Comcast is scheduled to release Q3 financial results on Oct. 26.

 

Comcast might stand alone on the video growth podium this year: most analysts predict Charter will have a small video subscriber loss in 2016 — ranging from 32,000 to 65,000 — as it integrates TWC.

 

Altice USA, which purchased Suddenlink Communications and Cablevision Systems in the past 12 months, has improved losses but isn’t expected to enter positive territory just yet.

 

For Comcast, the growth estimates for the year range from about 50,000 subscribers from Credit Suisse media analyst Omar Sheikh to 130,000 from Morgan Stanley media analyst Ben Swinburne.

 

Pivotal Research Group CEO Jeff Wlodarczak estimated in a September research note that Comcast would report flat third-quarter video customer growth, rallying to end the year with 109,000 more video subscribers than the year before.

 

With companies the size of Comcast, a loss of 30,000 customers, a gain of 30,000 customers or no growth at all is basically a rounding error, Wlodarczak said, although positive growth should help with investor sentiment.

 

Comcast has been working hard to reduce video customer losses for about five years — it first spoke of efforts to reduce video churn in 2011.

 

OPERATIONAL GAINS

During that time, Comcast has made big strides to improve the video customer experience, whether it be pushing for full-season stacking rights for shows or launching its state-of-the-art X1 platform, currently available in about 40% of its homes with the goal to be in 50% by the end of the year.

 

X1 has been a differentiator, offering an elegant user interface coupled with greater functionality and features. Last week, the company added to those features, including a “Team Reminder,” which notifies customers of live games, pre- and post-game shows and other programming featuring their favorite sports team.

 

Wlodarczak said that X1 has been a factor in video customer improvements, but he added that the competition has helped, too.

 

“Yes, the churn benefits of X1 help,” Wlodarczak said. “It also helps that AT&T is focused on marketing DirecTV and Comcast can lever their best-in-class data product to get consumers to sign up for video services.”

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