Comcast in Talks with Disney to Sell Hulu Stake

Comcast reportedly is in talks with Disney to sell its 30% stake in Hulu, which includes online television platform Hulu with Live TV, according to CNBC, which cited internal sources.

CNBC is owned by Comcast business unit NBC Universal.

Disney currently owns 60% of the 12-year-old streaming service with 25 million subscribers after it acquired 20th Century Fox. AT&T’s WarnerMedia unit just sold its 10% stake back to Hulu for $1.43 billion.

The discussions, which CNBC said are in the preliminary stage, were revealed hours after Comcast chairman/CEO Brian Roberts told investors the cable giant enjoyed owning a large stake of a Disney asset.

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“On Hulu, the relationship with NBC, it’s very much in everybody’s interest to maintain,” Roberts said on the all. “And we have no new news today on it, other than it’s really valuable. And we’re really glad we own a large piece of it.”

At the same time, with Disney firmly in control of Hulu and Comcast heretofore reluctant to move too far away from the pay-TV business model, selling its stake in an over-the-top business could help Comcast alleviate more than $100 billion in corporate debt following the $39 billion Sky acquisition.

Comcast reportedly could get $4.5 billion for its stake in Hulu, which lost $1.5 billion in 2018. Disney doesn’t expect Hulu to become profitable until 2024 — and only after possible international expansion.

At the same time, NBC Universal CEO Steve Burke remains skeptical of OTT business model, including Netflix.

“To be worth $150 billion, someday you’ve got to make at least $10 billion in EBITDA,” Burke told CNBC last year. “There’s at least a chance Netflix never makes that.”

Comcast, which only recently incorporated direct access to Netflix for its Xfinity pay-TV subscribers, plans to launch an OTT service for Xfinity in 2020.

Comcast Delaying 2020 AVOD Launch?

Comcast’s NBC Universal is set to launch an ad-supported over-the-top video service in 2020, targeting existing pay-TV subscribers as well as standalone consumers.

Or is it?

The launch was put into question after Comcast CEO Brian Roberts appeared to punt when asked about a specific timeframe for the OTT video service’s availability.

Speaking Feb. 26 at the Morgan Stanley technology, media & telecom confab in San Francisco, Roberts said a date remained in the works.

“We’ll refine it as we go along,” he said. “We’re all in to create it and not be like Netflix. We’ll launch when it’s ready.”

Roberts said the service gives NBC Universal – which will manage the platform – the opportunity to deliver “smart ads” to new consumers, while enabling current pay-TV distributors the ability to “give more value” to their video customers – for free.

“What can we do that consumers will like and creates value for our shareholders?” Robert said.

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Comcast has long eschewed OTT video, arguing its legacy cable service and Xfinity X1 set-top box offer superior content and access options.

Declaring that Comcast, which acquired U.K. satellite TV operator Sky last year, sits on “an awful lot of content,” Roberts said some programming would be better monetized through AVOD, while other shows would be more suited to third-party platforms.

“We produce or purchase $24 billion worth of content (entertainment and sports) across the globe,” he said.

The executive said that remaining loyal to traditional distribution has contributed to NBC Universal tripling pre-tax earnings since Comcast acquired the company from GE in 2009.

“We don’t have the mindset to take it off all these existing distribution platforms, including HBO, pay-TV and broadcast TV,” Roberts said.

Thinking Globally

Following Comcast’s $39 billion acquisition of Sky, which operates business units in the U.K., Germany and Italy, the media company represents 15% of the global broadband and video market, while generating about 50% of the world’s broadband and video revenue, according to Roberts.

He said Comcast and Sky represent 4% of global broadband/video consumers and 12% of the revenue, which increases to 25% in the U.K.

“They are clearly the markets you want to operate in,” Roberts said. “We are growing our market share. I don’t think anybody has the scale we have and market opportunity.”

Indeed, high-speed Internet has become the company’s most-profitable business unit, with annual growth exceeding 10%.

5G More Hype than Bite

Roberts shrugged off 5G wireless industry chatter, likening the next-generation mobile technology similar to hype surrounding Google Fiber, which launched to much fanfare in 2010, and was scaled back by Google in 2016 due to rollout costs.

The CEO questioned whether 5G could be cheaper than fiber or coaxial.

“The answer is absolutely not,” Roberts said. “At least not in our judgement. It’s much more expensive.”

Comcast’s broadband subscribers use 100 times more data than the average mobile user, according to Roberts.

“They’re hoping to get to the speeds we have today,” he said. “And by the time they do, we’re hoping to be 10 times faster with wired.

“5G is one of these moments. We know it’s coming, what its implications will be, [and] we have people staying on top it.”

Finally, Roberts lauded Universal Pictures’ Best Picture Oscar for Green Book and weekend box office win for How to Train Your Dragon: The Hidden World.

“I don’t think that’s happened very often in Hollywood where you do both on the same weekend,” he said.

 

 

Comcast Has High Hopes for Pending Streaming Video Service

Comcast has long eschewed over-the-top video, arguing its legacy cable pay-TV service and Xfinity X1 set-top box offer superior content and access options.

With much of the entertainment industry coveting OTT distribution, including pending platform launches from Disney and WarnerMedia, Comcast recently changed its tune announcing it would launch a free streaming service for its pay-TV subs in 2020.

Speaking on the Jan. 23 fiscal call, corporate CEO Brian Roberts said the service would be “distinct and compelling” offering current and prior seasons of NBC Universal programming, some original content and a “light” advertising load.

“It’s a great value proposition for consumers and provides marketers with a unique, targetable digital advertising and high quality premium programming,” said Roberts. “It will harness all the things that make our company so unique.”

He said that when presented to the company’s combined 54 million subscribers (with British satellite operator Sky and its Now TV OTT video platform), Comcast would be able to generate “significant value” over time by enhancing the company’s content monetization and strengthening the value of pay-TV.

“We will continue to sponsor a broad, varied distribution environment and see this platform as being a valuable addition to this highly effective strategy,” said Roberts.

NBC Universal CEO Steve Burke, a long-time foe to OTT video, embraced the strategic change, saying he believes the company now “under-monetizes” its content on the Internet.

In a fiscal call last year, Burke said that while the media company had deals with online TV services such as Sling TV, DirecTV Now, Hulu Live and YouTube TV, he doubted the platforms would make much of an impact.

“They’re off to a relatively slow start,” he said.

Indeed, NBC’s attempt at a standalone OTT comedy platform (SeeSo) shuttered after 18 months.

Neil Smit, former CEO of Comcast Cable, in 2016 infamously declared that he hadn’t seen an “OTT model that really hunts.” Less than a year later Smit stepped down as CEO, replaced by company veteran Dave Watson, whose stance on OTT is only slightly changed from his predecessor’s.

But management opinions have apparently changed in the face of market reality.

“In terms of content and taking things that are currently licensed elsewhere and moving them to the platform, I think it is going to be very positive for us financially, because in effect, we’re going to be a brand new buyer,” Burke said.

 

 

Comcast Cable Lost 344,000 Video Subs in 2018

Comcast Cable Jan. 23 disclosed it lost 344,000 pay-TV subscribers in 2018, which was nearly 85% more than the 186,000 subs lost in 2017.

In the fourth quarter (ended Dec. 31), Comcast lost 19,000 video subs compared to 38,000 subs in the previous-year period.

The losses underscore ongoing secular changes in the industry as consumers opt for alternative home entertainment distribution channels, including over-the-top video services such as Netflix, Amazon Prime Video and Hulu, and online TV platforms such as Sling TV and DirecTV Now.

Indeed, Xfinity X1, Comcast’s Web-based set-to platform, has added direct access to Netflix, Prime Video and YouTube to keep pay-TV subs.

The subscriber losses also impacted sales of digital movies and TV shows. Video revenue decreased 1.8% to $22.4 billion from $22.8 billion, primarily reflecting a decrease in the number of residential video customers.

Comcast, which doesn’t have standalone online TV or OTT video platforms, does benefit as one of the nation’s largest Internet service providers. The company added 1.23 million high-speed Internet subs in 2018 compared to 1 million net additions in 2017.

High-speed Internet revenue increased 9.3% to $17.1 billion from $15.7 billion, driven by an increase in the number of residential high-speed internet customers and rate adjustments.

Corporate CES Brian Roberts said he was pleased by the “strong” operational and financial results, including the 13th consecutive year of more than 1 million broadband net additions.

In addition, with the closing of the acquisition of British satellite TV operator Sky, Roberts said Comcast has transformed into a global company.

Indeed, Sky revenue increased 2.4% to $5 billion in the fourth quarter. Excluding the impact of currency, revenue increased 5.6%, reflecting higher direct-to-consumer, content and advertising revenue.

Direct-to-consumer revenue increased 4% to $4 billion, driven by improved product penetration for pay-TV, growth in Sky Mobile and Sky Fibre customers, as well as rate adjustments in the U.K.

The quarter’s average direct-to-consumer revenue per customer relationship increased by about 1%. Content revenue increased 35.7% to $363 million, primarily reflecting the wholesaling of sports programming, including exclusive sports rights recently acquired in Italy and Germany, increased penetration of premium sports and movie channels on third party pay-TV networks in the U.K. and monetization of our slate of original programming.

“[We] are excited about its future and the potential of our combined company in 2019 and beyond,” Roberts said in a statement.

 

 

 

Sky Boss Jeremy Darroch Says He’s ‘Sticking Around’ Euro Pay-TV Operator Following Comcast’s Acquisition

Jeremy Darroch, chief executive of Comcast Corp.’s newly-owned Sky subsidiary, said he plans on remaining at the U.K. satellite TV operator following Comcast’s $40 billion acquisition.

Speaking Oct. 25 on Comcast’s fiscal call, Darroch said he looked forward to leading Sky, which has more than 15 million subscribers, including subsidiaries Sky Deutschland and Sky Italia.

“We’re all energized by the next phase of growth and the additional opportunities that being part of Comcast will bring, on top of delivering our existing plans,” he said.

The news seemed to please Comcast chairman/CEO Brian Roberts, who introduced Darroch on the fiscal call. Indeed, for Darroch – who received a $47.4 million golden parachute following the close of the acquisition – not remaining at Sky could have proved a challenge to Comcast’s nascent international strategies.

“We’re really excited and pleased with the [Sky] management team” said Roberts. “We are delighted that Jeremy and many of the team, the senior team, we hope and believe are going to stay with the company.”

With Roberts agreeing to pay more than twice what 21stCentury Fox offered for outstanding interest in Sky, media analysts in the United States have questioned how the deal will be accretive for Comcast shareholders going forward.

“It seems as though they would like investors to forget that Sky is also a satellite TV provider, and satellite video distribution is increasingly becoming obsolete,” Craig Moffett, with MoffettNathanson Research, wrote in a note last month.

 

 

Comcast Q3 Pay-TV Subs Continue to Decline

Comcast Cable maybe slowly embracing third-party over-the-top video service such as Netflix, YouTube and Sling TV, but it continues to jettison pay-TV subscribers.

The cable operator Oct. 25 disclosed it lost 106,000 subscribers in the third quarter (ended Sept. 30), and improvement from the 125,000 subs lost in the previous-year period.

In reality, Comcast ended the quarter with 22 million video subs – down 375,000 subs from 22.39 million last year.

At the same time, Comcast is one of the nation’s largest ISPs, adding 334,000 residential broadband customers in the quarter – up 83.5% from 182,000 customer additions last year. The company ended the period with more than 24.7 million residential high-speed Internet customers, compared to 23.5 million customers last year.

It was the best Q3 for broadband additions in 10 years. Indeed, broadband revenue increased 9.6% in the quarter to $4.3 billion. Revenue is up 9.1% to $12.7 billion through the first nine months of the fiscal year.

“Comcast Cable’s pre-tax earnings growth was the fastest in six years, and customer relationship growth accelerated,” Brian Roberts, CEO of Comcast Corp., said in a statement.

 

Comcast CEO Brian Roberts Punts on Hulu Stake Question

Late in Comcast’s July 26 fiscal call, chairman/CEO Brian Roberts was asked about becoming a minority stake holder in Hulu should Disney’s $71 billion acquisition of 20th Century Fox Film and other Fox assets be approved.

Roberts replied management was not “prepared to address” some issues, which apparently included Hulu, which Comcast co-owns with Fox, Disney and WarnerMedia (formerly Time Warner).

Disney acquiring Fox would give it 60% ownership of Hulu, with Comcast holding 30% and WarnerMedia with 10%.

There’s no love lost between Disney CEO Bob Iger and Roberts when it comes to media mergers.

The two high-profile executives have been embroiled in competing bids to acquire controlling stakes in 20th Century Fox and British satellite TV operator Sky, among other properties.

With Disney planning to launch a branded over-the-top video platform in 2019, scuttlebutt suggests the Mickey Mouse company could hit the ground running incorporating Hulu — with 17 million subscribers — as part of its strategy increasing direct-to-consumer exposure with exclusive content.

Such a move could further undermine Comcast’s legacy cable business, which continues to lose consumers to cord-cutting and OTT video services such as Netflix, Amazon Prime Video — and Hulu.

“We’re focused on Sky now,” Roberts said. “We think it’s a great business, it will fit well, good use of capital. It’s also unique, but I don’t want to say anymore today and hopefully that addressed a number of your issues.”

Comcast Cable Loses 136,000 Video Subs in Q2

Comcast Cable July 26 reported it shed 136,000 video subscribers in the second quarter (ended June 30), up more than 200% from video sub loss of 45,000 during the previous-year period. The company lost 93,000 video subs in the first quarter.

Comcast ended the period with 22.1 million subs, compared to 22.5 million last year.

Video revenue decreased 1.9% to $5.6 billion from $5.7 billion, primarily reflecting a decrease in the number of residential video customers. Through the first-half of the year, cable revenue is down 1.4% to $11.2 billion from $11.4 billion last year.

Meanwhile, reflecting increases in cord-cutting and consumers shifting to over-the-top video entertainment consumption, Comcast broadband subscribers increased 61% to 226,000 from 140,000 last year to end the quarter with 24.4 million subs.

When factoring in 34,000 new broadband business subscriptions, Comcast saw its largest quarterly high-speed Internet sub growth in 10 years.

“These strong customer metrics were balanced with robust [pre-tax earnings] growth, fueled by high-speed Internet and business services,” Brian Roberts, CEO of Comcast Corp., said in a statement.

Separately, Comcast said it spent $23 million in the quarter on costs related to the aborted acquisition of 20thCentury Fox Film and ongoing purchase attempt of British satellite TV operator Sky.

Roberts on the July 26 fiscal call, said the cabler dropped its pursuit of Fox assets largely because of escalating costs.

“We thought we couldn’t build enough shareholder value by making the price that it seemed, in our judgement, to be able to buy it at, which was increasing,” said Roberts.

The executive said the company remains on track to acquire Sky, which he characterized as a “unique” fit and a good use of corporate capital.

“It will fit well,” Roberts said.

Comcast Ends Pursuit of 20th Century Fox, But Not Sky

As expected, Comcast Corp. July 19 officially dropped out of its attempt to acquire select assets of 21st Century Fox, including 20th Century Film and majority ownership of Hulu.

The media giant was considering upping its $65 billion offer for Fox, which included a 39% stake in British satellite TV distributor Sky.

“Comcast does not intend to pursue further acquisition of the Twenty-First Century Fox assets and, instead, will focus on our recommended offer for Sky,” the company said in a statement.

Comcast currently has a $34 billion (£14.75 per share) offer on the table for Sky, which exceeds Fox’s revised offer of £14 per share.

The decision should clear a path for Disney’s $71.3 billion bid, which has been approved by Rupert Murdoch, majority shareholder of 21st Century Fox.

“I’d like to congratulate [Disney CEO] Bob Iger and the team at Disney and commend the Murdoch family and Fox for creating such a desirable and respected company,” said Comcast chairman/CEO Brian Roberts.

 

 

Comcast Tops Fox’s Bid for Sky as British Government Greenlights Murdoch’s Offer

NEWS ANALYSIS — As expected, Comcast Corp. increased its all-cash offer for British satellite TV operator Sky to $34 billion (£26 billion), or £14.75 per share, exceeding 21st Century Fox’s revised offer of £14 per share. Fox, which is controlled by Rupert Murdoch, currently owns 39% of Sky.

This came the day before the British government — after months of regulatory review — formally cleared Fox’s pursuit for remaining interest in Sky.

“It’s now a matter for Sky shareholders to decide whether to accept 21stCentury Fox’s bid,” Jeremy Wright, U.K. cultural and media secretary, said in a July 12 statement.

Which could be meaningless considering the third player (Disney) in this high-stakes media consolidation battle last month upped its bid for Fox to $71.3 billion (which includes Fox’s stake in Sky) after Comcast offered $65 billion — topping the Mickey Mouse’s company’s initial $52.4 billion acquisition amount.

Disney CEO Bob Iger has called Sky – with 23 million subscribers in the U.K., Germany and Italy, and a budding over-the-top video business – the “crown jewel” in the Fox deal.

Comcast claims its superior cash offer (Disney’s bid is cash and stock) has been recommended by an independent committee on Sky’s board of directors.

The company says it has the relevant regulatory approvals in the European Union, Austria, Germany, and Italy —  and expects to complete the acquisition before the end of October.

In a statement, the Philadelphia-based media giant said it has long admired Sky and believes the satellite operator is an outstanding company and a great fit with Comcast Cable.

“Today’s [July 11] announcement further underscores Comcast’s belief and its commitment to owning Sky,” said the company headed by cable veteran Brian Roberts.

Fox and Disney shareholders are slated to vote July 27 on the latter’s bid for 20th Century Fox Film, Sky and related assets. This gives Comcast about two weeks to up its Fox bid. Or does it?

BTIG Research senior analyst Rich Greenfield — in response to media scuttlebutt Comcast and Disney could stop the fiscal escalations with Comcast taking Sky and Disney opting for Fox’s assets — says such a move would be detrimental to both sides.

He said combining Disney and 20th Century Fox Film would dwarf Comcast-owned Universal Studios, while Disney abandoning Sky would give Comcast greater distribution.

“Why start a fight you do not want to finish?” Greenfield wrote in a blog note. “If Disney’s acquisition goal is adding 100% owned and controlled subscriber relationships, why go through all this effort and allow Comcast to own all of or at the very least control Sky?”