Reversal of Fortune: Comcast Wins New Subs

Top MSO Ends Seven-Year Trend of Losses
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After nearly seven years of video-subscriber losses, Comcast is apparently the first major cable operator to reverse the trend, expected to report a slight gain in television customers in the fourth quarter.

Still, analysts are split as to whether that development will translate into positive growth for the industry.

Comcast has reduced its basic-video losses for 10 of the past 12 quarters, and was the leading candidate for most observers to cross into positive video-customer territory. Last week at the Citigroup Internet, Media & Telecommunications conference in Las Vegas, Comcast chairman and CEO Brian Roberts revealed that the nation’s largest cable operator did just that.

While offi cial results are not expected until Jan. 28, when Comcast is scheduled to fully report its fourthquarter results, Roberts told the Citigroup get-together on Jan. 7 the company “modestly grew” basic-video customers in the fourth quarter. It was Comcast’s first quarterly gain in video customers since 2007.

‘A REAL BEGINNING’

“It will take some time before the entire year will grow, but it is a real beginning of an exciting reversal of trends,” Roberts said. “We had a profitable quarter, as we had throughout the year, so it’s encouraging.”

Roberts’s suggested gain was in part due to advances in online-video extensions (TV Everywhere) and the new X1 platform, which provides customers with a more user-friendly guide.

He said Comcast plans to accelerate the rollout of X1 — which currently has about 1 million users — and the next-generation X2 to more than half of its footprint in the next few years.

Comcast could have been helped by the seasonally strong fourth quarter: customers are less likely to cancel service around the holidays. And it nearly reported a video-customer gain in 2012. The nation’s biggest cable operator lost just 7,000 video customers in the fourth quarter of that year.

“It is not altogether surprising they would manage to put up a modest gain,” Pivotal Research Group principal and senior media & telecommunications analyst Jeff Wlodarczak said. He said among other top MSOs, Charter Communications probably had the best chance of reporting fourth-quarter video-customer gains, although that was a long shot. He did not believe it was likely that Cablevision Systems, for example, would report a gain.

“Comcast may be a bit of a one-off ,” Wlodarczak said.

Last Wednesday (Jan. 8) at the Citi conference, Time Warner Cable chief financial officer Arthur Minson said TWC lost about 215,000 video customers in the fourth quarter.

Video-subscriber growth has been the cable industry’s Holy Grail for about a decade. The industry last showed a video customer gain in 2001 when, according to the National Cable & Telecommunications Association, there were 66.9 million U.S. cable customers. In 2012, according to the NCTA, that number had fallen to 56.4 million.

A sluggish housing market over the past five years has combined with stiff competition from satellite, telco and over-the-top video service providers to add to subscriber losses.

Even Comcast, one of the top video performers of the past three years, slipped slightly in the first three quarters of 2013. Comcast lost about 348,000 video subscribers in the first nine months of 2013, according to company data — more than the 337,000 the company lost for the full year in 2012.

KUDOS FROM MOFFETT

That would mean Comcast needed to gain at least 11,000 new video customers in the fourth quarter to keep 2013 subscriber losses below the 2012 deficit.

Still, in this era of heightened competition and fragmented audiences, some analysts saw Comcast’s feat as a testament to its hard work and video-centric strategy.

“It has been a long time coming, but it speaks to the steady hard work that Comcast has put into their video product,” MoffettNathanson principal and senior analyst Craig Moffett said. “We thought we might see the first positive quarter nearly two years ago, but household formation has been slower than we expected coming out of the recession, so Comcast faced an even steeper uphill climb than we have anticipated.

“It is a tremendous testament to the team at Comcast that they have finally pulled this off ,” Moffett said.

TAKEAWAY

Analysts are divided as to whether Comcast’s fourthquarter subscriber gain is indicative of an industry-wide phemonenon.

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