Skip to main content

Comcast Is Not Your Father’s Cable Company

Wednesday was an exciting day for Comcast CEO Brian Roberts. Tuesday night, Comcast had announced that it would be paying $16.7 billion to buy out GE’s remaining stake in NBCUniversal two years early.

He spent Wednesday talking about the transaction. On TV with MSNBC’s Joe Scarborough. With analysts during an earnings conference call. With NBCU staffers at a town meeting at Saturday Night Live’s Studio 8H at Rockefeller Center, hosted by Brian Williams, where the theme was “We’re All In.”

Roberts’ message: “This is a really special moment for our company,” he told analysts. “Two years in, the strategic rationale for bringing together our content and distribution businesses and the opportunities for growth and value-creation available at NBCUniversal are even stronger and better than we first anticipated.”

At one point, an analyst asked him what his vision for Comcast was now.

“My next goal would be to make it — continue to make it — absolute home for where a young person coming out of school or somebody with their career says ‘this is a company at the cross hairs of media and technology and all parts of this company make it where I want to spend my career,’” Roberts said.

That’s an interesting comment from a guy who went into his father business at a time when that business was a pretty simple cable company.

Wall Street also thought the acquisition was a good idea. Comcast shares rose nearly 3% on Wednesday, indicating what Vijay Jayant of ISI Group called “the positive investor sentiment toward the strategic, operational, and financial merits of the full consolidation.”

“Our view [is] NBCU is positioned for solid EBITDA and OCF growth driven by a continued turnaround at broadcast and strong cable assets,” added Michael Senno at Credit Suisse.

Of course there were a couple of areas of concern following the earnings announcement.

Analysts were troubled by rising expenses. Costs were up to create new products and for marketing products and targeting customers. Most importantly, the company said programming expenses were expected to increase at low double-digit rates in 2013, up from 7% in 2012. CFO Mike Angelakis said the rise resulted from “the continued expansion of rights to multiple platforms, additional channel launches, continuing increase in sports cost, meaningful increases for retransmission consent fees, and step-ups for recently completed long term agreements.”

“We believe the elevated programming cost growth is a 2013 event given ESPN and Fox (incl. retrans) are two of the largest renewals,” Senno said. “We expect costs to trend toward normalized levels thereafter. ”

And if costs for programming are rising, it should benefit NBCU, which is trying to boost its revenue from retransmission and subscriber fees.

But in the fourth quarter, NBCU’s cable networks reported slow advertising growth and a 3.5% decline in cash flow as the company invested in original programming.

“NBCU’s Cable Networks again were the division that underperformed our expectations by the widest margin,” Jayant said. “Those assets were widely touted as the impetus for Comcast to buy NBCU in the first place, but ratings softened in 4Q12 and so, too, did the ad revenue. “