Cable Drives Comcast Q1

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Comcast reported its lowest basic subscriber losses in almost four years in the first quarter, the result of efforts to drive innovation and improve customer services, company executives said Wednesday.
Overall, consolidated revenue increased 31.8% to $12.1 billion and consolidated operating cash flow was up 14.1% to $4.1 billion, largely driven by strong performance at its cable systems.
Comcast surprised analysts with stronger than expected performance on several subscriber fronts - it lost just 39,000 basic video customers in the period, the lowest since the first quarter of 2007 and high-speed Internet additions, at 418,000 in the quarter were above industry trends. But on a conference call Wednesday to discuss results, Comcast Cable Communications president Neil Smit said the reason for the improved performance was simple: better products, better service and better marketing.
Smit pointed to the nation's largest MSO's efforts to drive innovation by releasing at least one new product per quarter, strides made on the customer service front to reduce the total number of service calls and marketing programs like its "Endless Fun" campaign, which Smit said helped spur a double-digit increases in customers' intent to purchase in the first quarter.
"Our service calls were down, our repeats were down and that's taking some unnecessary noise out of the system," Smit said of the customer service efforts. "...We're targeting our marketing better. What really drove the total numbers was more retention than it was gross additions. I think that is healthy for the business."
Smit was also encouraged by the strong showing on the high-speed data front - the 418,000 additions were its largest since the first quarter 2008 and beat consensus estimates by almost 30%. Smit said that efforts to target digital subscriber line customers and higher speed tiers - its 50 Megabit per second service is available in about 90% of homes and its new 105 Mbps tier is available to about 40 million homes - is paying off.
At its NBC Universal programming arm, revenue was driven by strong performance at the cable networks (up 13.3% to $2 billion in the period), offset by a 35% decline in broadcast television revenue and unfavorable comparisons. Total revenue at NBCU was down 11.5% in the quarter to $4.3 billion, compared to $4.9 billion in 2010. However, 2010 included $782 million in revenue from the Vancouver Olympic Games. Excluding the impact of the Olympics, revenue was up 5.2% at NBCU. Pro forma operating cash flow at the programming unit was up 4.9% to $473 million in the period.
NBCU CEO Steve Burke said that the broadcast turnaround could take a few years, adding that the programming giant intends to spend about $200 million on new broadcast shows in 2011 and another $100 million on cable during the year. He said that NBC will make about 21 broadcast pilots this year, about the same as in the previous year.
"Really the key is not in necessarily increasing inventory, it's in making better shows," Burke said.
Burke also addressed speculation that NBC would spend big on sports programming - particularly the NFL and the Olympics, adding that NBCU will take a disciplined approach.
"There will be instances where we get deals and renew deals as was the case recently with hockey," Burke said of the recent renewal of NHL games for its Versus cable channel. "There will be instances where we go as far as we feel we should go and someone else get the rights, which appears to be the case with the Pac 12. As it relates to the Olympics or the NFL, we think those are two fantastic properties and would love to have them, but would like to make money. There are a variety of ways you can make money -- advertising or investing in a cable channel that would allow you to have increased advertising or increased affiliate fees. We're not going to do anything that doesn't have a business plan that pencils out to a positive NPV [Net Present Value]."

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