M+E Connections

Comcast CFO: Strong Film Franchises, Olympics, X1 Key Company Drivers

Strong film franchises, NBC Universal’s broadcasting of the upcoming Summer Olympics, and continued strength of Comcast Cable’s X1 interactive TV platform are among the key reasons why Comcast is optimistic about its future results, according to Comcast CFO Michael Cavanagh.

Speaking during a May 23 keynote at the J.P. Morgan Global Technology, Media and Telecom Conference in Boston, Cavanagh said NBC Universal’s film business had a solid 2015, taking in $6 billion globally, with $1.2 billion in operating cash flow, the latter a record number for the studio after a record year in 2014, he added. The results were “driven by franchises,” he said, noting Universal last year became the first studio ever to have three movies in one year take in more than $1 billion each at the global box office.

Of those movies, “Furious 7” made $400 million at the box office in China alone, better than the film sequel’s performance in even the U.S., he said, calling China an “important market” for the company. Universal now distributes movies on its own in China, which he called one major key to success there.

The other three big Universal film franchise hits last year were “Fifty Shades of Grey,” “Jurassic World” and the animated “Minions.” The “weak performance” of the live-action film “The Huntsman: Winter’s War” will hurt the company in the first half of this fiscal year, but “Jason Bourne” and “The Secret Life of Pets” are going to be released in the back half of this year and should do well, Cavanagh said.

After its $3.8 billion purchase of DreamWorks Animation, Universal’s goal is to release two animated movies a year, including two to three “tentpoles,” he said. DreamWorks was making two animated movies a year before the purchase by NBC Universal. It “doesn’t make sense to have a public company that makes only two movies a year,” Cavanagh said, telling attendees at the conference that two studios will combine their synergies. Universal’s existing animated film division and DreamWorks Animation will each continue to make two animated movies a year on average, he said.

A further plus for Universal’s film business will come in two years, when it will be able to distribute the DreamWorks Animation movies after a deal between DreamWorks Animation and Fox comes to an end, he said. The purchase of DreamWorks Animation also provided NBC Universal with a TV animation studio and Comcast will now be able to use all the DreamWorks Animation properties to help Comcast’s theme parks business, which is adding one new attraction per park per year, he said.

The DreamWorks Animation purchase was a “once in a lifetime opportunity” for Comcast “at a price that made sense,” he said.

The Summer Olympics, meanwhile, underscore the “importance of sports rights” for a TV network, he said. “Live big sports events are just a key to engagement both on the advertising side” and for NBC Universal’s affiliate relationships, he said. Comcast expects this summer’s games in Rio will be more popular among TV viewers than the ones in London four years ago that were profitable for the company, he said. NBC Universal will carry 6,000 hours of programming from the Summer Olympics, including live streaming from NBC apps, he said.

“We’re four months ahead of crossing the billion dollar mark for advertising sales,” he said of the Summer Olympics broadcast. The Olympics will be important for the company for many years to come, he predicted.

Comcast’s X1 interactive TV operating system continues to be rolled out to subscribers, with 40,000 boxes shipping each day that are adding about five percentage points of penetration inside Comcast Cable’s footprint a quarter, he said. The company had 35% penetration at the end of its last quarter and will be at “close to 50% penetration by the end of this year,” he said. Among the many advantages of X1set-top DVRs is that Comcast Cable sees “much lower churn” among those subscribers who have it, he said.

Comcast Cable added 53,000 pay TV subscribers in the first quarter this year, he also said. Of the subscribers who stay with Comcast Cable over time, 30% upgrade to a higher-priced video package, he said. But he conceded that the company has to “give our customers what they want,” even if that means stripped-down video offerings.

A growing number of stripped-down over the top (OTT) bundles are including the four major TV networks plus Time Warner’s channels and that is “relatively costly” for consumers compared to the “skinny” bundles that NBC Universal has participated in from companies including Dish Network with Sling, he said. “The good news is that every report you read about those kinds of offerings includes NBC as must-have content,” he said.