Comcast Corp.’s cable-division president, Steve Burke, said at an industry
conference in Boston Monday that he sees programming-cost growth rates dropping
dramatically in the next few years as programmers lose some of their clout while
Comcast has been one of the tougher negotiators during contract-renewal time,
and it gained more muscle with its November acquisition of AT&T Broadband,
making Comcast the largest MSO in the country with 21 million subscribers.
Comcast had said in the past that it expected to reach $270 million in
programming-cost reductions this year -- a number it said during its
second-quarter-earnings conference call that it is likely to exceed.
At the Morgan Stanley Global Media & Communications conference Monday,
Burke said those programming-cost reductions are not just a one-time thing.
"I think we are significantly ahead of where we thought we would be regarding
the $270 million, but, as important, we think we are going to be arresting the
growth rate for many, many years to come," Burke said.
He declined to be specific, but he added that a 3%-4% reduction in
programming-cost growth would translate into a savings of between $120 million
and $160 million, given Comcast’s $4 billion programming-cost base.
Arresting programming-cost growth probably has as much to do with Comcast’s
size -- Time Warner Cable, the country’s No. 2 MSO has 10.8 million subscribers,
about one-half that of Comcast -- a fact that Burke acknowledged.
"Obviously, one of the things you get to do when you have 21 million
subscribers is try to exert a measure of discipline," he said.
"It doesn’t make any sense to me when inflation is 1% or 2% for a programmer
to walk in the door and assume they are going to get 5%, 7%, 10% price
increases, let alone 15% or 20%," Burke added. "Most of the basic programming
channels’ ratings are declining. That was not the case 10 years ago -- 10 years
ago, it made sense to pay more because you were getting more. That’s not the
case today. We’re going to be extremely disciplined."
While programming rates are expected to decline, Burke said customer
additions for its cable-modem service are rising, despite price-cutting by
While Wall Street has been concerned over digital-subscriber-line competition
from telephone companies, Burke said high-speed-data additions in July and
August were up 30% compared with the same time last year.
He added that Comcast’s high-speed service will be further differentiated
from DSL once the MSO doubles the downstream speed of its service from 1.5
megabits per second to 3 mbps in all of its markets by the end of the year.
"I think job No. 1 is increasing speed," Burke said.