Comcast’s Profit Slips in Q3

Despite seeing 622,000 of its cable TV subscribers decamp since the year began, Comcast executives insist that cord-cutting has had a minimal impact on its core business.

Speaking to analysts and investors during the cable giant’s third-quarter earnings call, Comcast Cable president Neil Smit said that exit interviews with former customers indicate that most subs who didn’t switch to a competitor such as Verizon’s FiOS TV or a satellite service elected to save money by opting for over-the-air TV rather than choosing to consume television programming online.

Smit added that 40 percent of those who parted ways with Comcast had subscribed to its most basic tier of video service.

Comcast chairman and CEO Brian Roberts (pictured) chalked up the losses to a flagging economy, steady unemployment and a sagging housing market, as well as steep comparisons versus the year-ago period. In the third quarter, Comcast lost 275,000 video customers, bringing its sub base to 22.9 million households. He added that Comcast saw “real year-over-year improvement” at the end of the quarter and in October.

Roberts’ assessment of the minimal impact cord-cutting has had on Comcast’s business jibes with many analysts’ opinions. As MagnaGlobal, svp and director of global forecasting Brian Weiser noted earlier this month, “It will be a decade before ‘over-the-top’ video services substantially affect the industry.”

As has been the case since the year began, Roberts said he expects regulators to hand down a ruling on Comcast’s proposed acquisition of NBC Universal by the end of December. He also noted that Comcast was likely to assume a peacemaker’s role in the contentious retransmission consent debate, adding that having a foot in both worlds would give the company a unique perspective on the matter. “By being a cable operator and a broadcaster, perhaps we can foster ideas that will not leave the consumer caught in the middle,” Roberts said. “We’ll have to take it one step at a time. . . . But we think there is an opportunity to play a constructive role.”

Roberts took a moment to acknowledge the contributions of Comcast president Steve Burke, who has been tapped to assume the role of CEO at the new joint venture. “Over the past 11 months, Steve has been spending a lot of time planning so we can hit the ground running when the deal closes,” Roberts said. “We are in a strong position to deliver a great entertainment experience to consumers and to really drive new value for our shareholders.”

For his part, Burke said that “almost all the news [related to NBCU] is positive,” although he did acknowledge that there remains a good deal of work to be done to right the flagship broadcast network. Burke reiterated his contention that the greatest opportunity lies in the NBCU cable outlets, which include the top-rated USA Network, as well as Syfy, Bravo and Oxygen.

Local advertising revenue grew 27 percent in Q3 to $461 million; discounting the influx of political spending, ad sales were still up a robust 19 percent versus the year-ago period.

All told, Comcast’s quarterly revenue increased 7 percent to $9.49 billion. Higher operating costs, taxes and other expenses translated to a Q3 profit of $867 million, down 8 percent from $944 million in the year-ago period. Revenue at the core cable unit grew 7 percent to $8.98 billion, while the programming division — a clutch of networks that includes E!, Golf Channel, Versus, Style Channel and G4 — upped revenue 9 percent to $416 million, thanks in large part to a much-improved advertising marketplace.

Roberts also updated analysts on progress at Canoe Ventures, the advanced advertising initiative backed by the six largest MSOs. While activation has been delayed by standardization issues at the systems level — the technology must be calibrated to function in each of the participating operators’ cable plants — Roberts said that Canoe is beginning to paddle in the right direction. “Canoe now has 10 million homes in which you can buy interactive ads,” he said. “It’s doing what we wanted the interactive business to do.”