uploads/2016/04/Comcast-programming-costs1.jpg

Why Comcast Expects Programming Costs, Spending to Rise in 2016

By

Updated

Comcast’s programming costs

Cable companies such as Comcast (CMCSA) and Time Warner Cable (TWC) have high content costs. These costs are similar to fixed costs incurred by media networks such as the Walt Disney Company (DIS) and Viacom (VIAB).

However, as distributors, they have additional infrastructure investments compared to content providers and aggregators. Content costs account for a sizable portion of a cable company’s operating costs.

Comcast expects its programming costs to rise by about 10% in 2016 as a result of higher retransmission consent fees and increased costs for sports programming. Comcast will also renew several of its programming deals in 2016.

The company is also negotiating its programming deals to expand its content rights to the TV Everywhere and On Demand platforms. It’s expanding its content rights and pursuing new content in a bid to draw more Millennials to its TV Everywhere and On Demand platforms.

As the graph above shows, Comcast’s programming and production costs made up 32.6% of the company’s total revenue of $19.2 billion in 4Q15. Comcast had programming and production costs of $6.2 billion in 4Q15, a rise of 9% over 4Q14.

Article continues below advertisement

Comcast also expects a rise in capital expenditure

Comcast expects capital expenditure (capex) as a percentage of revenues to be flat at 15% for Comcast Cable in 2016, resulting from the company’s continued investment in rolling out customer premise equipment, network infrastructure, and its business services segment.

However, it expects capex to rise by about 10% in 2016 for its NBCUniversal business. The reason for this increase in capex is that Comcast plans to continue to invest in its theme parks and in the consolidation of Universal Studios Japan (EWJ).

Comcast makes up 2.8% of the PowerShares QQQ ETF (QQQ). For an investor interested in getting exposure to the computers sector, QQQ has 12% exposure to the sector.

Advertisement

More From Market Realist