X1 Not Next OTT Nationwide Service, Comcast CEO Roberts Says
Comcast doesn't plan to use its X1 platform as a route to competing nationwide in the over-the-top (OTT) marketplace, CEO Brian Roberts said during the company's Q2 earnings call Wednesday. "We just fundamentally believe for now that our end market, end footprint strategy, is where we add the most value to consumers," Roberts said. While its broadband and business services operations rely on having a network, Roberts said, "OTT economics are unproven to us, and out of footprint it's not clear that that's the right strategy for us. We're happy with the strategy we have."
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X1 has about 40 percent penetration in Comcast's footprint and should be at close to 50 percent by year's end, with the company shipping 885,000 X1 set-top boxes in Q2, said Comcast Cable CEO Neil Smit. Smit said X1 penetration likely will top out at 80 to 85 percent of Comcast's customer base: "There's a part of the base you probably don't get to because you don't want to disrupt satisfied legacy customers who are in single-play video." Smit also said the company's XB6 multiservice wireless gateway should be commercially available late this year or early next.
For the quarter, Comcast consolidated revenue was $19.3 billion, up 2.8 percent. Cable communications was $12.4 billion, up 6 percent, with video revenue at $5.6 billion, up 2.8 percent. Comcast said Q2 -- traditionally a down quarter seasonally -- had 4,000 video subscriber losses, making it the company's second-best Q2 in a decade. Comcast stock closed Wednesday at $67.92, up 1.1 percent.
If Charter Communications similarly has decent video subscriber numbers, it will cement that cable TV's infrastructure advantage in broadband is also a TV advantage and that cord cutting "remains quiescent, at least for now," said MoffettNathanson analyst Craig Moffett in a note to investors. "The list of cord-cutter options hasn't grown much, and Sling TV has slowed sharply (and so has Netflix)," Moffett said, saying Comcast's video subscriber strength is largely due to X1. XB6 "will put further distance between Comcast and its video competitors," he said. Charter's Q2 numbers are due Aug. 9.
Cable programmers increasingly will eliminate lower-performing channels and moving content from channel to channel "as the discussions with MVPDs [multichannel video programming distributors] get more and more contentious," NBCUniversal CEO Stephen Burke said. "We and most of the big media companies are concentrating on their big brands," he said, pointing to Comcast's consolidating its G4 and Style networks. "You'll see more of that. You want to make sure that your big networks are fully supported and you're more willing to re-allocate [content]," Burke said. "You'll see us and others continue to trim some of the more marginal channels. There's just too many channels and people are spending too much programming channels that are not fully distributed."
High-speed Internet revenue was up 8.6 percent to $3.4 billion, Comcast said, saying 79 percent of residential customers now receive speeds of at least 50 Mbps, up from 69 percent a year ago. Roberts said the company plans to broadly roll out a prepaid Wi-Fi offering aimed at lower-income consumers who maybe wouldn't meet the company's credit standards.
The company said its broadcast TV revenue, at $2.13 billion, was up 17.3 percent. A big driver of that was retransmission consent revenue, up 63.5 percent, and content licensing revenue up nearly 60 percent. Retrans revenue should grow substantially more, Burke said. "We have grown retrans very, very substantially in the last five years but still lag the other three big broadcasters," he said, saying in some major contracts retrans "is going to take significant step-ups and we're still hundreds of millions of dollars less than some of the other comparable peers. And we think we deserve the same amount for retransmission consent."