Sochi golden for Comcast’s 1Q; X1 reducing churn
The numbers are in: Comcast CEO and chairman Brian Roberts said the company’s X1 platform reduced “voluntary” churn by 20 percent to 30 percent relative to its broader base in the first quarter.
Overall, Comcast is dropping 15,000 to 20,000 X1 boxes, which are being provided by Pace and Humax, a day into customers’ homes, which doubled its deployment rate from six months ago.
On this morning’s earnings call, Comcast Cable CEO and president Neil Smit said that in addition to reducing churn—Comcast added 24,000 new video subscribers in the quarter for its second quarterly gain in a row—X1 users were more likely to be triple play subscribers. Other benefits to X1 included more VOD consumption and advertising revenues across on demand and linear programming.
“We believe our X1 operating system provides our customers an unrivaled experience making it easier to discover and enjoy tens of thousands of content choices while at the same time integrating apps and social media, and consumers really like this experience,” Roberts said on the earnings call.
Roberts said that the X1 platform would lead to “years and years” of more innovation for Comcast and its subscribers.
"It’s a game changer to put it in the cloud,” he said. “To be able to click a button and have it go to Denver and back faster than a click would have happened with a television a few years ago; it creates fantastic opportunities. We’ve talked about some of them today and some of them haven’t even been invented yet.”
During its fourth quarter conference call, Comcast said it would start offering X1 to double play customers after initially offering it to triple play subscribers. After a trial in Augusta, Ga. , three years ago, Comcast first launched its X1 platform in Boston  in 2012. Comcast’s X1 platform combines an interactive programming guide with customized apps and social media features.
The X1 platform also looms large in Comcast’s $45 billion bid to buy Time Warner Cable. In order to counter arguments that the deal would be anti-competitive and bad for the consumer, Comcast has said its superior services would be a boon to current Time Warner Cable subscribers, which was a mantra repeated by Roberts this morning.
“We see significant benefit for consumers in our ability to offer our innovative and industry leading products to a larger residential footprint along with opportunities in business services and advertising,” Roberts said. “Our proposed merger with Time Warner Cable is an exciting and unique opportunity and we remain confident that the combination will strengthen a world class organization that will benefit customers, employees and shareholders.”
This weekend rumors surfaced that Comcast was in talks with Charter Communications in regards to divesting itself of 3 million subscribers as part of the deal. Comcast CFO and vice chairman Michael Angelakis said the company wouldn’t comment on rumors, but the mandated divestitures could include a spin off or outright sale of the subscribers. Factors cited by Angelakis included “our ability to divest subscribers in the most tax efficient way possible, our ability to shrink our equity and deliver cash to our shareholders and maximize our presence in our most strategic markets.”
“There’s a lot of work to be done in addition to the integration effort,” he said on the conference call. “We will provide updates as we refine our thinking and analysis.”
By the numbers
Comcast’s first quarter net income increased 30 percent from a year go to $1.87 billion, or 71 cents a share, up from $1.44 billion, or 54 cents a share a year ago. Revenue increased 14 percent to $ 17.41 billion.
While Comcast posted increased revenues across all of its major business lines, NBC Universal saw a large revenue bump thanks to the Winter Olympics in Sochi. During the Olympics, NBC averaged 21.4 million viewers during primetime while generating 61.8 million visitors across all platforms, the latter of which was a 26 percent increase over the 2010 Winter Olympics in Vancouver.
“Over at NBC Universal the results were terrific this quarter.” Roberts said. “The headline is obviously the Sochi Olympics which aired across our broadcast and cable networks and generated over 1.1 billion dollars in revenues and contributed positively to operating cash flow.”
NBC Universal’s numbers also benefited from Jimmy Fallon taking over as the host of “The Tonight Show.” Overall, NBC is positioned to end the full season as top the network in the coveted 18- to-49 age demographic for primetime and late night viewers. In the quarter, NBC Universal’s revenue increased by 29 percent to $6.88 billion.
Cable services revenue grew 5 percent to $10.8 billion, led by data and business services, respectively. Comcast added 383,000 data subscribers en route to increasing broadband revenues 9 percent to $2.88 billion. With broadband services, 38 percent of Comcast’s residential customer base subscribes to its Blast and Extreme tiers with an average speed of 50 Mbps.
Business service revenue increased 24 percent to $917 million and is approaching a run rate of $4 billion.
“We’ve only captured about 20 percent of the small end of the market and about 5 percent of the mid-size segment,” Angelakis said. “Our optimism here continues as business services represent a large and attractive opportunity for the company.”
Video services revenue increased by $1.3 percent o $5.2 billion.
Due to an increase in customers buying more products from Comcast, total revenue per customer relationship increased 4.5 percent to $134 per month.
Helped by the addition of 142,000 voice subscribers, Comcast’s voice services revenue grew by 2.1 percent to $920 million. Thanks in part to political ad spending, ad revenues increased by 6.2 percent to $519 million.
Comcast added 124,000 customer relationships overall in the first quarter to bring its total to 26.8 million. Out of those subscribers 68 percent were double play customers and 36 percent triple play subscribers. Comcast added 155,000 triple play customers in the quarter.
Also in the first quarter, Comcast reduced its truck rolls by 500,000, or 8 percent compared to a year ago.
“It’s a great start to the year,” Roberts said at the end of the conference call.