Comcast stems video sub losses in Q3; Xcalibur heads to 'major market'
While Comcast is still mulling the fine print of its Xcalibur service, including price point and whether it will be a premium-only offering, the IP- and cloud-based, next-generation service is headed to a major market next year.
Comcast President Neil Smit provided a few details on the Xcalibur service, which came out of cloaking mode at The Cable Show earlier this year during a demonstration by CEO Brian Roberts, during this morning's third-quarter earnings call.
The demo in Chicago featured a hybrid set-top box from Pace, which is known internally as the "Parker" box, that connected to Comcast's cloud-based video system back in Denver. In addition to a better viewing experience, the cloud-based system gives Comcast a much shorter window for new products and innovations.
Ahead of next year's launch, Xcalibur is working its way through a trial in Augusta, Ga.
"We've been very pleased with the test results," Smit said. "I think in terms of rollout, we're currently working on rollout. We'll go to a major market in the first half of the year, and then we'll be rolling it out on a more widespread basis during the year. Then we'll be able to roll out Xcalibur across a variety of platforms, including the Parker box that we have in Augusta, additional high-end set-top boxes, and other customer-owned and maintained devices, such as the Xbox and other devices.
"From the positioning perspective, we're not quite clear how we want to position it yet. We're working on that, what customers it will go [to], and the pricing and whatnot, so that's work in progress."
The service, which features a cloud-based user interface and a DOCSIS 3.0 modem integrated into the set-top box, brings more Internet-like capabilities to TV viewing.
"One of the most significant aspects that appeals to us, and we're seeing that as we tweak it, is having the guide be in the cloud and being able to move quickly to make changes and tweaks, and modifications, and create new apps," Roberts said. "So we have an app that we're testing, for instance, that I saw yesterday in the sports area where you get just instant access to all of the various games on television. You know what is happening right now, you can change or get just updates or little video snippets. A variety of things that also work on the iPad shortly, and so [it's] very, very exciting for the roadmap and innovation when you move the brains out of the box into the cloud."
Like other cable operators' recent third-quarter earnings reports, Comcast did lose more residential video subscribers in the third quarter – 165,000 to be exact – but Roberts was encouraged that the bleeding was staunched from the 275,000 losses from the same quarter a year ago. Comcast ended the quarter with 22.36 million video subscribers.
Comcast added 126,000 HD or DVR customers in the third quarter for a total of 10.6 million, or 53 percent of its digital customer base.
Total video revenue for customers in the third quarter increased to $139 per month, thanks to more customers taking multiple products and higher contributions from Comcast Business Services customers.
High-speed Internet once again turned in a solid performance, with 261,000 new data customers compared with 249,000 a year earlier. More than 24 percent of Comcast's data subscribers now take a higher-speed tier above its primary service. Comcast, the largest ISP in the nation, has a 34 percent penetration rate for its data service. The company's data revenues increased 10 percent in the quarter, due to more customers taking the higher speeds, growth in the subscriber numbers and rate adjustments.
"High-speed Internet was once again the largest contributor to cable's revenue growth," Roberts said. "Every quarter this year we've added more high-speed Internet customers than the same quarter of 2010, and we continue to take share as we expand the differentiation between our high-speed service and DSL."
Comcast increased its voice customers by 133,000 subscribers, but that fell well short of the 228,000 it added in the same quarter a year ago. On the plus side, voice revenue increased 6.3 percent in the quarter. Customer penetration for voice is now 18 percent of homes passed.
According to Comcast chief financial officer Michael Angelakis, 70 percent of Comcast's subscribers took at least two of the company's services, while 36 percent took all three by the end of the quarter. Overall, Comcast added 229,000 voice, video and high-speed data customers, which was a 13 percent increase in net additions from a year ago.
As of Sept. 30, video, high-speed Internet and voice customers totaled 49.4 million, an increase of 1.4 million, or 3 percent, in the past 12 months.
Business services revenue increased 39 percent in the quarter to $454 million. Comcast expects to reap more business services revenue going forward as it moves into the medium-size business space. To facilitate that growth, Comcast hired more than 600 new business services employees over the past 12 months.
Due to the lack of political ads compared to a year ago, Comcast's ad revenues were down 4 percent in the third quarter.
Cable revenue increased 5 percent to $9.3 billion, compared with $8.9 billion in the third quarter of 2010.
"A couple of years ago, we decided to invest in DOCSIS 3.0 and to convert the majority of our analog bandwidth to digital," Roberts said. "I'm happy to say that we have completed the DOCSIS 3.0 and all-digital project, and the results are fantastic. In fact, I really believe that it is a significant contributor to our strong results."
Overall, Comcast reported third-quarter net income of $908 million, or 33 cents per share, up from $867 million, or 31 cents per share, in the period a year ago. Comcast's revenue increased 51 percent from the previous third quarter to $14.3 billion.