Earnings Call: Comcast Will Invest In Digital During 2009; Area of Growth

This story was written by Rory Maher.
CEO Brian Roberts, CFO Michael Angelakis, and COO Stephen Burke led an upbeat fourth quarter 2008 earnings call for Comcast (NSDQ: CMCSA) that highlighted a continued emphasis on digital offerings at the company amidst increasing competition from telephone and internet companies. Burke said that 70 percent of the households it reaches can now get digital services, which led to an increase of 247,000 digital subscribers during the quarter.  The company acknowledged that even with its dual revenue streams from subscriber fees and advertising, it was still feeling pressure from the economy, but digital remained an increasingly large contributor to growth at the overall company.  In addition:

Digital voice revenue was up 38 percent.
433,000 subscribers added or were upgraded to advanced digital services, which includes cable, voice, and internet.
45 percent of digital customers opt to subscribe to advance digital services, which generates $80-$85 of monthly revenue per subscriber.

Competition: A hot topic from a regulatory and operational perspective, the company addressed competition for TV viewers from the internet and phone companies (via their IPTV offerings).  Burke pointed to Comcast's participation in the Canoe initiative, which seeks to counter the superior targeting and measurment of internet ads versus TV ads by creating the technology that enables the viewer to interact with ads on cable and allowing for more targeting by demographic.  Burke mentioned "creative versioning," which enables more targeted advertisements on TV by more narrowly defining the demographics of a given cable household, as an example.  For example, under creative versioning, Spanish-language commercials can be limited to only Hispanic-speaking households and truck manufacturers can opt to target households with more men in them.  The new service for advertisers is expected to launch this spring.

Still, the company did acknowledge increased competition for subscribers from phone companies and internet broadcasters is a reality of its business, citing 22 percent of its footprint as having too many competitors fighting for too little customers.  To counter this the company is not sitting still and has implemented tiered internet offerings to maintain customers during the recession and aggressively transitioning its analog bandwidth to digital, which will enable more channel and VOD offerings on the newly free analog spectrum.  In particular:

Tiered internet offerings range from the economy package, which offers packages ranging from economy at 1 mb/s speed for $24.99 per month to premium at 10 mb/s speed at $139.95 per month.
A goal of 50-60 analog channels converted to digital in 2009, which will free up the necessary capacity to offer a greater variety of channels and more video-on-demand services.

Regarding video-on-demand and the impact of competition from internet services like its own Fancast, Hulu, Veoh and other professional online video broadcasters, Burke said that most of the content seen on those services are already offered on Comcast's on-demand platform and receive significant views.  Furthermore, programmers like the affiliate fees they receive from cabe companies, which currently is far more than they receive in online advertising, so continue to emphasize their cable TV offerings versus their internet offerings. 

By Rory Maher