Behind Comcast's Strategy for Long-Term Growth

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Part 7
Behind Comcast's Strategy for Long-Term Growth PART 7 OF 7

Why Comcast’s Earnings Grew So Big Last Quarter

Cable segment

In Comcast’s (CMCSA) 3Q17 financial results, its EBITDA (earnings before interest, tax, depreciation, and amortization) improved 5% YoY (year-over-year) to $7.2 billion, driven by a 13% decline in programming and production costs as well as by higher revenues.

Why Comcast&#8217;s Earnings Grew So Big Last Quarter

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Programming expenses in 3Q17 for Comcast’s Cable segment grew 12.4% YoY to ~$3.3 billion due to higher retransmission consent fees, the renewal of programming contracts, and rising sports programming expenses. Non-programming costs for the segment rose 0.6%, driven by a 2.1% rise in technical and product support expenses, but offset by a 2.4 % fall in advertising and marketing expenses.

However, the segment’s adjusted EBITDA grew 5.4% YoY in 3Q17, despite the impact of hurricanes. Eliminating the hurricane impact, Comcast estimates that its EBITDA would have grown 6%. Its EBITDA margin in 3Q17 remained flat YoY, and Comcast also expects the margin to remain flat YoY at 40.2% for 2017.

NBCUniversal Segment

In 3Q17, Comcast’s programming and production expenses in its NBCUniversal segment fell 27.8% YoY to $3.3 billion, mainly driven by a 39.1% fall in broadcast television division costs. The adjusted EBITDA for the NBCUniversal segment grew 6% due to the 11.9% and 9.8% growth in adjusted EBITDA for the filmed entertainment and theme parks businesses, respectively. The growth was offset by a 15% fall in EBITDA in the broadcast television business.

After eliminating the impact of $250 million in adjusted EBITDA produced by the Rio Olympics in 3Q16, the adjusted EBITDA for the NBCUniversal division grew 19.9% YoY.

In order to combat competition, media companies are starting to invest heavily in content. In 2016, Boston Consulting Group and SNL Kagan estimated that ESPN (DIS) will spend nearly $7.3 billion on content, compared with Netflix (NFLX), NBC, and CBS (CBS), which will likely invest $6 billion, $4.3 billion, and $4 billion, respectively.


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