netrashetty
Netra Shetty
Comcast Corporation (NASDAQ: CMCSA and NASDAQ: CMCSK), commonly referred to as Comcast, is the largest cable operator and home internet service provider in the United States, providing cable television, broadband Internet, and telephone service to both residential and commercial customers[3][4][5] in 39 states and the District of Columbia.[6] The company is headquartered in Philadelphia, Pennsylvania. Comcast also has significant holding in several cable networks (including E! Entertainment Television, Style Network, G4, The Golf Channel and Versus), distribution (ThePlatform), and related businesses. Comcast's proposed acquisition of a majority stake in NBC Universal was approved by the Federal Communications Commission (FCC) on January 18, 2011. The acquisition took place on January 28, 2011.
Comcast (NASDAQ: CMCSA) is the nation’s largest cable television and Internet service provider in terms of number of customers served. Comcast served 23.6 million cable customers in 39 states, 15.9 million high-speed Internet customers, and 7.6 million voice (phone) customers and passed over 51.2 million homes and businesses across 39 states.[1]
In December 2009, General Electric Company (GE) gave Comcast a 51% stake in its NBC Universal division. In addition to $6.5 billion in cash, Comcast will merge its cable networks and web assets, valued at $7.25 billion, with NBC Universal.[2] The deal was one of the largest in recent media business history, and gave Comcast additional profitable cable franchises.[3] NBC Universal was the segment of GE that had the highest operating margin for five of the past six years, and as such, Comcast benefits a lot from the deal. Further, many analysts believe that the once-powerful NBC Universal will thrive again under Comcast with programming and a focus on digital initiatives like Hulu and the large number of cable channels that are part of the deal.[4]
For the fiscal year 2009, Comcast reported $35.8 billion in total revenues and posted a net income of $3.64 billion. In Q3 2010, Comcast reported that revenue rose to $9.5 billion from $8.8 billion in the year-ago quarter. Net income was $867 million in the third quarter compared with $944 million in the comparable period a year before. The company's CEO attributed the rise in revenue to "overall customer growth, [and] a robust advertising market," while the company noted that it spent $66 million on transaction costs associated with its proposed deal to purchase a controlling interest in entertainment giant NBC Universal Inc. in the third quarter.[5]
Contents
1 Business Overview
1.1 NBC Universal Deal
1.2 Segments
2 Trends and Forces
2.1 NBC Deal Subject to Regulatory Approval
2.2 Vulnerable to Strength of U.S. Housing Market Economy
2.3 Bundling Expands Product Offerings, but Increases Competition
2.4 The cable TV market is shifting to a new digital system, which is upsetting some customers
2.5 Net Neutrality
3 Competition
4 References
Business Overview
NBC Universal Deal
In December 2009, General Electric (GE) and Comcast announced a deal that would give Comcast a 51% stake of media conglomerate NBC Universal.[2] Comcast will pay GE $6.5 million in cash and merge its cable networks and web assets valued at $7.25 billion in return for the majority stake in one of the largest transactions in recent media business history. Under the terms of the deal, NBC Universal, which includes the NBC media empire along with USA Network, CNBC and Universal Studios, will become a joint venture between GE and Comcast, with the cable company owning a 51% majority stake in NBC Universal, with provisions for Comcast to eventually purchase full ownership. Comcast will benefit from the deal by further vertically integrating backward into the production side of media as well as adding large and profitable cable franchises to its national cable business.[6] However, the deal has raised some questions about net neutrality and antitrust issues, requiring the deal to undergo lengthy regulation reviews before it is passed, to ensure that Comcast does not obtain too much power in the media world.[7]
Segments
Comcast is the nation's largest provider of cable services by number of subscribers, offering a variety of entertainment, information, and communication services to residential and commercial customers. The company's largest operating segment is its Cable Division, which includes primarily its video, Internet, and phone services. In 2008, Comcast served approximately 23.6 million video customers, 15.9 million high-speed Internet customers, and 7.6 million phone customers.[1] In addition to its Cable Division, Comcast also earns revenue through its Programming Division.
Video (54.2% of 2009 Revenue): Comcast offers video services to 23.6 million customers.[1] This revenue increase was due mostly to rate adjustments as well as customers upgrading to Comcast's more expensive digital video services. This increase in revenue is significant because Comcast lost approximately 623,000 customers between 2008 and 2009 due to increased competition.[8]
Internet (21.7% of 2009 Revenue): Comcast offers high-speed Internet service to about 15.9 million customers nationwide. In 2008, the company earned approximately $7.8 billion from its Internet services.[9]
Phone Services (9.1% of 2009 Revenue): CMCSA provides local and long-distance phone service to about 7.6 million customers. In 2009, Comcast earned $3.3 billion in revenue from its phone services, a substantial increase from its 2008 revenues of $2.6 billion.[9] This was largely due to Comcast increasing the number of users.
Advertising (4.0 of 2009 Revenue): Comcast's advertising segment earns revenue through progamming license agreements with programming networks. In 2009, Comcast earned about $1.4 billion in revenue from its advertising.
Other (3.0% of 2009 Revenue): Comcast earns revenue through its regional sports networks, digital media center, on-screen guide advertising, and fees from various other services. In 2009, Comcast earned $1.1 billion in revenue in its other segment.[9]
Franchise Fees (2.7% of 2009 Revenue): Comcast earned $948 million in revenue from franchise fees in 2009.
Programming (4.2% of 2009 Revenue): Comcast earns revenue in its programming segment mainly through advertising sales and from subscriber license fees for its networks, which include E!, Golf Channel, VERSUS, G4, and Style.[1] In 2009, Comcast earned $1.5 billion in its programming segment.[10]
Trends and Forces
NBC Deal Subject to Regulatory Approval
In December 2009, GE sold a 51% stake of its NBC Universal division to Comcast for in one of the largest transactions of recent media business history.[3] The deal gives Comcast more power due to the addition of powerful cable franchises, but many critics also argue that the deal also brings harm in the form of net neutrality. Some critics have gone so far as to call for the FCC to create and implement Net Neutrality rules that protect the interests of other companies doing business on the Internet.[11] Meanwhile, FCC Commissioner Michael Copps argues that the deal proves that media conglomerates are still very much a current issue, with the deal adding even more power to media giant Comcast.[12]
The media conglomerate created through the deal thus also raises some interesting antitrust issues. As of December 2009, Comcast was not only the nation's largest cable provider, serving 24 million households, but also one of the largest internet broadband providers with approximately 16 million subscribers. This deal gives Comcast even more clout in the media industry, and has some worried that it is gaining too much power within the industry, which means the deal is likely to go through an extended regulatory review from both the FCC and the U.S. Department of Justice's antitrust division. Although the deal is expected to go through, a negative result from this regulation review would be disastrous for Comcast.[7]
Vulnerable to Strength of U.S. Housing Market Economy
With more than 85% [13] of television owners already paying for cable or satellite services, the number of new potential cable customers is limited. New homes are an important source of new customers for cable companies and as a result, growth in the cable industry is closely tied with growth in the housing market. Furthermore, the company believes that weakened consumer spending in 2010 will further slow expansion of its Cable services.
In September 2009, Comcast's CFO announced that, as the U.S. Housing Market improves, subscriber growth will improve and strengthen along with it.[14]
Bundling Expands Product Offerings, but Increases Competition
Comcast's already large customer base--the largest in the industry--means that their best future customers may already be in their base. Given the limited universe of potential new cable customers, a significant growth area is selling to their current cable customers other services, namely Internet and voice services. Comcast brands this strategy their "Triple Play," otherwise known as bundling.
Bundling is the marketing strategy of cross-selling customers across cable, Internet, and voice services. Comcast's "Triple Play" and costs approximately $99 per month. Consumers benefit because they have one consolidated monthly bill, and one company to deal with if there are problems. However, this strategy also increases the amount of competitors that Comcast must face, including Verizon Communications (VZ) and AT&T (T). Furthermore, Comcast is feeling similar pressure as its phone service counterparts, as a secular shift towards mobile phones reduces the amount of households that use a traditional phone line.
The cable TV market is shifting to a new digital system, which is upsetting some customers
Cable providers all over the U.S. are requiring their subscribers to shift to new digital systems. In January 2009, RCN reached 100% digital penetration in New York, Philadelphia, Washington DC, and Chicago.[15] Comcast subscribers, primarily in the Washington D.C. area, have been forced into this transition as well. The benefits for Comcast are obvious: it can offer more channels with a digital platform. Many customers, however, are upset about losing the lower priced analog option. [16]
Net Neutrality
Congress is considering legislation that would allow broadband Internet providers--like Comcast--to charge for preferred delivery of digital content. “Net neutrality” advocates are lobbying Congress to treat all web content the same, as is the current standard. Comcast and other Internet providers claim they should be able to sell premium service to larger users of their networks, since they are investing heavily to build and maintain such networks. If legislation is passed to prevent Comcast from charging premium prices for differentiated delivery, it would limit Comcast's future revenue growth.
Competition
Comcast's focus on bundling widens the scope of competition beyond cable companies to Internet service providers and voice companies. Comcast's main competition in cable TV is from both traditional cable television providers like Time Warner (TWX) and satellite providers such as DirecTV (DTV) and Dish Network (DISH). In previous years, Comcast has lost customers to the satellite providers, who have aggressively pursued new customers. After Comcast began expanding its Internet and phone services in its Triple Play Package in 2008, however, the company now competes on many fronts with companies like AT&T (T) and Verizon Communications (VZ).
Company 2009 Revenue (USD million) 2009 Net (USD million)
Comcast[17] 35,756 3,638
Time Warner[18] 25,785 2,438
DirecTV[19] 21,565 942
Dish Network[20] 11,664 636
AT&T[21] 123,018 12,535
Verizon[22] 107,808 3,651
Comcast (NASDAQ: CMCSA) is the nation’s largest cable television and Internet service provider in terms of number of customers served. Comcast served 23.6 million cable customers in 39 states, 15.9 million high-speed Internet customers, and 7.6 million voice (phone) customers and passed over 51.2 million homes and businesses across 39 states.[1]
In December 2009, General Electric Company (GE) gave Comcast a 51% stake in its NBC Universal division. In addition to $6.5 billion in cash, Comcast will merge its cable networks and web assets, valued at $7.25 billion, with NBC Universal.[2] The deal was one of the largest in recent media business history, and gave Comcast additional profitable cable franchises.[3] NBC Universal was the segment of GE that had the highest operating margin for five of the past six years, and as such, Comcast benefits a lot from the deal. Further, many analysts believe that the once-powerful NBC Universal will thrive again under Comcast with programming and a focus on digital initiatives like Hulu and the large number of cable channels that are part of the deal.[4]
For the fiscal year 2009, Comcast reported $35.8 billion in total revenues and posted a net income of $3.64 billion. In Q3 2010, Comcast reported that revenue rose to $9.5 billion from $8.8 billion in the year-ago quarter. Net income was $867 million in the third quarter compared with $944 million in the comparable period a year before. The company's CEO attributed the rise in revenue to "overall customer growth, [and] a robust advertising market," while the company noted that it spent $66 million on transaction costs associated with its proposed deal to purchase a controlling interest in entertainment giant NBC Universal Inc. in the third quarter.[5]
Contents
1 Business Overview
1.1 NBC Universal Deal
1.2 Segments
2 Trends and Forces
2.1 NBC Deal Subject to Regulatory Approval
2.2 Vulnerable to Strength of U.S. Housing Market Economy
2.3 Bundling Expands Product Offerings, but Increases Competition
2.4 The cable TV market is shifting to a new digital system, which is upsetting some customers
2.5 Net Neutrality
3 Competition
4 References
Business Overview
NBC Universal Deal
In December 2009, General Electric (GE) and Comcast announced a deal that would give Comcast a 51% stake of media conglomerate NBC Universal.[2] Comcast will pay GE $6.5 million in cash and merge its cable networks and web assets valued at $7.25 billion in return for the majority stake in one of the largest transactions in recent media business history. Under the terms of the deal, NBC Universal, which includes the NBC media empire along with USA Network, CNBC and Universal Studios, will become a joint venture between GE and Comcast, with the cable company owning a 51% majority stake in NBC Universal, with provisions for Comcast to eventually purchase full ownership. Comcast will benefit from the deal by further vertically integrating backward into the production side of media as well as adding large and profitable cable franchises to its national cable business.[6] However, the deal has raised some questions about net neutrality and antitrust issues, requiring the deal to undergo lengthy regulation reviews before it is passed, to ensure that Comcast does not obtain too much power in the media world.[7]
Segments
Comcast is the nation's largest provider of cable services by number of subscribers, offering a variety of entertainment, information, and communication services to residential and commercial customers. The company's largest operating segment is its Cable Division, which includes primarily its video, Internet, and phone services. In 2008, Comcast served approximately 23.6 million video customers, 15.9 million high-speed Internet customers, and 7.6 million phone customers.[1] In addition to its Cable Division, Comcast also earns revenue through its Programming Division.
Video (54.2% of 2009 Revenue): Comcast offers video services to 23.6 million customers.[1] This revenue increase was due mostly to rate adjustments as well as customers upgrading to Comcast's more expensive digital video services. This increase in revenue is significant because Comcast lost approximately 623,000 customers between 2008 and 2009 due to increased competition.[8]
Internet (21.7% of 2009 Revenue): Comcast offers high-speed Internet service to about 15.9 million customers nationwide. In 2008, the company earned approximately $7.8 billion from its Internet services.[9]
Phone Services (9.1% of 2009 Revenue): CMCSA provides local and long-distance phone service to about 7.6 million customers. In 2009, Comcast earned $3.3 billion in revenue from its phone services, a substantial increase from its 2008 revenues of $2.6 billion.[9] This was largely due to Comcast increasing the number of users.
Advertising (4.0 of 2009 Revenue): Comcast's advertising segment earns revenue through progamming license agreements with programming networks. In 2009, Comcast earned about $1.4 billion in revenue from its advertising.
Other (3.0% of 2009 Revenue): Comcast earns revenue through its regional sports networks, digital media center, on-screen guide advertising, and fees from various other services. In 2009, Comcast earned $1.1 billion in revenue in its other segment.[9]
Franchise Fees (2.7% of 2009 Revenue): Comcast earned $948 million in revenue from franchise fees in 2009.
Programming (4.2% of 2009 Revenue): Comcast earns revenue in its programming segment mainly through advertising sales and from subscriber license fees for its networks, which include E!, Golf Channel, VERSUS, G4, and Style.[1] In 2009, Comcast earned $1.5 billion in its programming segment.[10]
Trends and Forces
NBC Deal Subject to Regulatory Approval
In December 2009, GE sold a 51% stake of its NBC Universal division to Comcast for in one of the largest transactions of recent media business history.[3] The deal gives Comcast more power due to the addition of powerful cable franchises, but many critics also argue that the deal also brings harm in the form of net neutrality. Some critics have gone so far as to call for the FCC to create and implement Net Neutrality rules that protect the interests of other companies doing business on the Internet.[11] Meanwhile, FCC Commissioner Michael Copps argues that the deal proves that media conglomerates are still very much a current issue, with the deal adding even more power to media giant Comcast.[12]
The media conglomerate created through the deal thus also raises some interesting antitrust issues. As of December 2009, Comcast was not only the nation's largest cable provider, serving 24 million households, but also one of the largest internet broadband providers with approximately 16 million subscribers. This deal gives Comcast even more clout in the media industry, and has some worried that it is gaining too much power within the industry, which means the deal is likely to go through an extended regulatory review from both the FCC and the U.S. Department of Justice's antitrust division. Although the deal is expected to go through, a negative result from this regulation review would be disastrous for Comcast.[7]
Vulnerable to Strength of U.S. Housing Market Economy
With more than 85% [13] of television owners already paying for cable or satellite services, the number of new potential cable customers is limited. New homes are an important source of new customers for cable companies and as a result, growth in the cable industry is closely tied with growth in the housing market. Furthermore, the company believes that weakened consumer spending in 2010 will further slow expansion of its Cable services.
In September 2009, Comcast's CFO announced that, as the U.S. Housing Market improves, subscriber growth will improve and strengthen along with it.[14]
Bundling Expands Product Offerings, but Increases Competition
Comcast's already large customer base--the largest in the industry--means that their best future customers may already be in their base. Given the limited universe of potential new cable customers, a significant growth area is selling to their current cable customers other services, namely Internet and voice services. Comcast brands this strategy their "Triple Play," otherwise known as bundling.
Bundling is the marketing strategy of cross-selling customers across cable, Internet, and voice services. Comcast's "Triple Play" and costs approximately $99 per month. Consumers benefit because they have one consolidated monthly bill, and one company to deal with if there are problems. However, this strategy also increases the amount of competitors that Comcast must face, including Verizon Communications (VZ) and AT&T (T). Furthermore, Comcast is feeling similar pressure as its phone service counterparts, as a secular shift towards mobile phones reduces the amount of households that use a traditional phone line.
The cable TV market is shifting to a new digital system, which is upsetting some customers
Cable providers all over the U.S. are requiring their subscribers to shift to new digital systems. In January 2009, RCN reached 100% digital penetration in New York, Philadelphia, Washington DC, and Chicago.[15] Comcast subscribers, primarily in the Washington D.C. area, have been forced into this transition as well. The benefits for Comcast are obvious: it can offer more channels with a digital platform. Many customers, however, are upset about losing the lower priced analog option. [16]
Net Neutrality
Congress is considering legislation that would allow broadband Internet providers--like Comcast--to charge for preferred delivery of digital content. “Net neutrality” advocates are lobbying Congress to treat all web content the same, as is the current standard. Comcast and other Internet providers claim they should be able to sell premium service to larger users of their networks, since they are investing heavily to build and maintain such networks. If legislation is passed to prevent Comcast from charging premium prices for differentiated delivery, it would limit Comcast's future revenue growth.
Competition
Comcast's focus on bundling widens the scope of competition beyond cable companies to Internet service providers and voice companies. Comcast's main competition in cable TV is from both traditional cable television providers like Time Warner (TWX) and satellite providers such as DirecTV (DTV) and Dish Network (DISH). In previous years, Comcast has lost customers to the satellite providers, who have aggressively pursued new customers. After Comcast began expanding its Internet and phone services in its Triple Play Package in 2008, however, the company now competes on many fronts with companies like AT&T (T) and Verizon Communications (VZ).
Company 2009 Revenue (USD million) 2009 Net (USD million)
Comcast[17] 35,756 3,638
Time Warner[18] 25,785 2,438
DirecTV[19] 21,565 942
Dish Network[20] 11,664 636
AT&T[21] 123,018 12,535
Verizon[22] 107,808 3,651
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