Cable Customers Are Still Dropping But Comcast Corporation (CMCSA) Adds Internet Subscribers
Comcast Corporation (NASDAQ:CMCSA) has been adding more Internet customers than cable users in the recent times. The development follows the trend in which subscription video providers like Netflix, Inc. (NASDAQ:NFLX) are also adding more users as more people cut the cord with pay-TV providers.
Comcast lost 8,000 video customers but added 407,000 broadband users in the quarter ended March, which was the largest quarterly addition since at least 2013. The company disclosed that it had 22.4 million customers on both sides of cable and broadband, but the balance has so far this quarter been tilted in favor of broadband.
The shift of subscribers to more of Internet than cable has accelerated in the advent of online TV, which is pulling people away from pay-TV because of cheaper options. Several companies have entered streaming video business, expanding adoption of online TV and posing threat to market leaders such as Netflix.
The emergence of streaming TV is not only threatening to kill traditional cable television industry, but also seems to be putting cost pressure on cable providers. Comcast Corporation (NASDAQ:CMCSA), a leader in the cable business, disclosed that its programming expenses increased nearly 8% to $9.8 billion in 2014. The company had hoped that teaming up with Time Warner Cable Inc (NYSE:TWC) would give it much influence in content cost negotiations, but that didn’t happen as expected.
The Internet business is more profitable for cable companies, which is why Comcast Corporation (NASDAQ:CMCSA) loves the trend where it is adding more broadband customers. According to market research firm SNL Kagan, cable companies enjoy 60% cash flow margin in Internet sells compared to 17% in video subscription. While there is a lot of fear of cord cutting, broadband is a higher margin product with less costs for cable companies.
Cable companies will certainly miss out from the revenue as the trend continues, but they maintain certain advantages in the broadband world. Cable is faster then DSL, and not nearly as costly to lay down as fiber. This is particularly damaging in rural areas where population density does not justify the high investment.
In the latest quarter, Comcast Corporation (NASDAQ:CMCSA) reported 10.7% bump in Internet revenue compared to 3% in video business. Overall, the company earned $0.81 a share in the March quarter on revenue of $17.85 billion. Net income jumped 10% and revenue rose 2.6% in the quarter.
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