UPDATED with stock movement. Comcast, which reported strong third-quarter results that beat Wall Street forecasts, is leaning into areas where some rivals are struggling: traditional broadcast and cable TV as well as pay-TV distribution.
“Despite all of the factors that make it look like a less-good business in the next 10 years than it has been in the last 10 years, our television business is very strong,” said NBCUniversal chief Steve Burke during a conference call with analysts.
Investors sparked to the clear focus and strong results, boosting Comcast shares 5% in morning trading, a reversal of yesterday’s downturn and good news toward the end of a year that has seen shares dive 17%.
For seven straight quarters, Burke noted, operating cash flow at NBCU has risen by at least 7%. CEO Brian Roberts said the entertainment unit has posted a double-digit combined annual growth rate since being acquired in 2010. In a research note hailing a “humdinger of a quarter,” analyst Steven Cahall of RBC Capital Markets, said results from Comcast’s cable operations as well as its network and production holdings will “go some way to assuaging ecosystem fears.” While the company did shed 106,000 net video subscribers, that tally was “less bad” than RBS’s estimate of 155,000 or Wall Street’s consensus of 152,000, Cahall wrote. Comcast in that way is “bucking the recent trend from Verizon and AT&T that sent [media stocks] into a tailspin yesterday,” he wrote.
The broadcast and cable divisions of NBCU each posted growth in advertising, but even stronger revenue categories were distribution, retransmission and licensing. On the cable side, licensing and “other” revenue shot up 36%. A 9.5% rise in distribution revenue stemmed from previous renewal agreements and subscriber losses the company described as “moderating.” On the broadcast side, retransmission revenue surged 21%, and content licensing revenue gained 24.7%.
While many programmers are getting punished by investors for losing traction with distributors as fickle consumers shuffle their pay-TV packages, Burke said the picture is still rosy for NBCU. On the advertising front, for example, Burke said both upfront and scatter buying have delivered. “Political is way up,” he added. “We’re having a very very strong political season. Looks more like a presidential year than a mid-term year.”
Referring to subscriptions across traditional and virtual MVPDs, Burke said, “Every single month, if you look at the trailing 12 months, those trends have gotten better.” He did concede that “the growth of the virtual MVPDs is starting to plateau, at least in the last month” (a reality reflected earlier this week in AT&T’s quarterly results). But overall, he maintained, the company is positioned well enough to weather the changes.
Comcast, which dedicated a section of the call to its $40 billion acquisition of Sky, is embracing its traditional roots as the landscape evolves, Burke said. “As the world pivots here to more streaming, we want to make sure that we respect and nurture and continue to invest in and outperform on the television side, wherever the world goes in terms of new technologies.”
Unlike rivals like Disney and AT&T, Comcast has taken a conservative approach to direct-to-consumer streaming, at this point operating just one stand-alone subscription service, under the NBC Sports banner. Analysts focused their questions on pay-TV trends and unlike on other companies’ earnings calls, they didn’t raise the delicate dynamics of direct-to-consumer — both a necessity in a Netflix-driven world and a threat to traditional pay-TV — at any point.
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