Comcast profits up 14 percent despite losing 121,000 cable-TV subscribers

Business pundits and consumers wrote Comcast Corp.'s obituary with the rise of such online content streaming services as Netflix, and their cord-cutting fans.

But even to the surprise of Comcast Corp. CEO Brian Roberts, the opposite is happening.

To stream movies and shows, you need a high-speed internet service. And many times that service — in some places the only one available, in fact — is Comcast’s Xfinity Internet.

The Philadelphia company reported on Thursday the fastest profit growth in more than a decade in its cable division, or almost 10 percent, as lower-profit cable-TV subscribers are being replaced with more profitable broadband customers. The trend is reshaping the company’s U.S. business.

“If a customer doesn’t choose to buy one of our video products, they’re buying our broadband at a better rate than we might have anticipated years ago,” Roberts said in a conference call. “And that’s the shift we’re talking about that is playing to our strength.”

Comcast now has 5.7 million more broadband customers than cable-TV customers, or 27.6 million compared with 21.9 million. The gap will certainly widen in 2019.

In the first three months of 2019, Comcast shed 121,000 TV customers while it added 375,000 broadband customers. And off each one of those broadband customers, Comcast earns a higher profit margin, executives have said.

Comcast functions like a content wholesaler as a cable-TV company. It pays entertainment companies such as the Walt Disney Co. monthly fees to distribute their channels. But Comcast doesn’t have to pay those fees for its broadband service, which simply moves data over telecom lines owned by Comcast itself.

Partly reflecting these economics, Comcast said that first-quarter profits jumped 14 percent to $3.6 billion, or 77 cents a share. Comcast’s first-quarter revenue -- on an adjusted, or pro forma, basis -- fell 3.3 percent to $26.9 billion, mostly because of the unfavorable comparison with the year-ago quarter when Comcast-owned NBC benefited from broadcasting the advertising-rich winter Olympics and the NFL SuperBowl.

The NBC television network is part of Comcast-owned NBCUniversal. Thursday’s earnings report also included the results of Sky television in Europe. Comcast bought Sky for $40 billion after bidding against Disney for it in 2018.

Comcast stock jumped 2.6 percent on the earnings news, closing at $42.93. Before Thursday’s earnings release, Comcast’s stock has risen 23 percent this year, compared with 17 percent for the S&P 500 index, according to Bloomberg.

In a conference call, Roberts sought to push back against concerns on Wall Street that Comcast may not have the breadth of entertainment content to compete globally against Netflix and Disney, saying that Comcast spends $24 billion a year either acquiring or creating TV shows, movies and other content for its distribution channels.

Later this year, Roberts added, NBCUniversal and Sky will jointly launch a global news channel. “Our industry-leading scale is a defining asset,” he said.

Earlier this year, Comcast announced that it will launch a streaming service in early 2020 through NBCUniversal and Sky -- after years of pooh-poohing streaming as unprofitable or low-margin businesses. This new streaming service will enter a crowded field of established and new entrants.

Roberts responded to an analyst’s question on whether Comcast would sell its 30 percent ownership in Hulu to Disney, which owns 60 percent of the popular streaming service, saying “it’s really valuable and we’re really glad we own a big piece of it.”

Disney recently announced its own plans for streaming services to compete with global giant Netflix.

But later Thursday morning, the Comcast-owned CNBC reported that Comcast was talking with Disney about selling its Hulu stake, citing unidentified sources. Comcast had no comment on the CNBC story.

NBCUniversal’s first-quarter revenue fell 12.5 percent, again because of the comparison with the Olympics in the year-ago period. Excluding for the Olympics, NBC broadcast television rose 7.1 percent and cable networks revenue climbed 3.2 percent.

NBCUniversal theme park’s have been a stellar business for Comcast, though first-quarter revenue declined 0.4 percent. Comcast invested heavily into new attractions at the California and Florida theme parks, with capital expenditures at NBCUniversal soaring 68 percent to $453 million for new Harry Potter and Jurassic Park attractions.

One weakness in the Comcast empire was Sky. Sky revenue fell 5 percent, though when adjusted for currency rose 2 percent. Profits fell 17 percent. This was attributed to costs for soccer and other sports rights. Sky -- whose largest pay-TV markets are U.K., Germany and Italy -- added 112,000 new customers compared with 38,000 in the year-ago period.