|As of Q4 2016||Subscribers||Change over Q4 '15|
Comcast video sub growth marred by slump in profitability
(comments on Q4 2016 numbers)
Comcast delivered its first full year of video subscriber growth in 10 years in 2016. But performance should have been better in Q4, and video business profitability continued to decline.
Comcast delivers full
Comcast completed the year adding an additional 80,000 video subscribers in Q4. That gives the company a net gain of 160,000 subscribers for the full year. This is the first time Comcast has had a net gain of subscribers on an annual basis since 2008.
While this great performance should be celebrated, there is still some cause for concern. The fourth quarter is traditionally a good one for the pay TV business. In 2015, Comcast lost 43,000 subs in Q3 and gained 89,000 in Q4. That’s a swing of 132,000. In 2016, the swing from Q3 to Q4 was just 48,000. This could mean the power of X1 to attract new subscribers is waning.
X1 delivers the video subs
The root of the rejuvenation of Comcast’s video business is the X1 platform. It is now in half of video customer homes, and the company expects 60+% to have it by the end of the year. It is also proving a powerful revenue earner. Speaking on the Q4 earnings call, Neil Smit SVP and President of Comcast Cable, said DVR uptake is 3 times legacy and pay-per-view is two times.
Cox had best video year since 2008 https://t.co/gfImkBSDNJ
— Todd Smith (@toddpr) January 26, 2017
Cox Cable echoed the praise for X1. Cox licenses the platform and has deployed it to customers under the Contour brand. Todd Smith, Cox head of PR, says it helped deliver the company’s best video year since 2008. He went on to say that:
“We’re seeing similar trends as others in the industry thanks largely to our new Contour product that expanded to all markets in 2016 and its new features including voice control and predictive search.”
Video revenue increases, license cost grow more
The beneficial effect of X1 on the video bottom line is clear. The company boosted video ARPU 3.5% over Q4 2015, reaching $83.60. Though video subscribers increased just 0.7% year-over-year, annual video revenue increased an impressive 3.9%.
That said, the profitability of the video business continued to decline sharply. Programming costs increased an eye-popping 12% in Q4 over the same quarter last year. In Q4 2015, 48% of ARPU went directly to pay for the content, and in Q4 2016 that increased to 51.7%. It’s sobering to think that just 42% of ARPU went to programming costs in Q4 2012.
Video a key part of mobile?
Comcast plans to launch wireless phone service for its customers in 2017. The company will anchor it with its extensive WIFI network, and leverage the Verizon wireless network when out of range of WIFI. Though the company has few details, there is a strong possibility video will be a key part of it.
T-Mobile has set the wireless bar on video with its Binge-On zero-rated streaming feature. Verizon and AT&T are both excepting their own services from counting against the wireless data cap. Expect Comcast to, at a minimum, exempt all TV Everywhere authenticated video streaming while connected on a WIFI from counting against the cap. If it chooses to be more aggressive, it may zero-rate all video streaming on mobile while on the WIFI network.
Why it matters
Comcast gained subscribers in 2016 for the first time in 10 years, and boosted revenue nearly 4%.
Content licensing costs increased an amazing 12% over the year.
Nearly 52% of every dollar spent on video by customers goes directly to content providers. In 2012, 42% went to content providers.
Tables and graphs on this page are derived from public Comcast quarterly earnings statements and from the analysis and calculations of nScreenMedia
|For Q4 2016||Revenue||Change (over Q4 '15)|
|Annual Total||$80.4B 2016||+7.9% over 2015|