Comcast, Viacom Shifting With The Times

The cable TV industry continues to face stiff competition. With players like Hulu eating into other player’s share of content and subscriber base, the war on cable remains heated. Furthermore, Microsoft recently announced the plans to offer TV content on Xbox 360 for Xbox 360 Live users, making it possible for people to watch programming even without a set-top box. Despite such market circumstances, players continued to surpass market expectations.

Comcast’s Financials
Comcast’s (NASDAQ:CMCSA) Q2 revenues grew 51% over the year to $14.2 billion, ahead of the Street’s target of $13.83 billion. EPS of $0.42 grew 27% over the year and exceeded the market’s expectations of $0.41.

Their cable business revenues grew 6% over the year to $9.34 billion. High-speed internet revenues grew 10% over the year to $2.19 billion, while business services revenues grew 42% to $0.44 billion. Their pay-TV subscriber numbers continued to fall over the year, albeit at a lower rate. They added 99,000 video, Internet and phone customers in the quarter, although they reported a net loss of 238,000 video customers. Further, they ended the quarter with 49.1 million video, Internet and phone customers compared with 47.8 million customers a year ago and 22.5 million video customers, compared with 23.2 million last year. With 17.6 million broadband customers, Comcast remained the leading Internet service provider in the country.

During the quarter, they repurchased 22.6 million shares of their stock for $525 million.

Comcast–NBC Merger
Comcast is pleased with the success of the NBC acquisition as the network’s content has helped keep them on top of the TV ratings. Shows like “The Voice” helped make NBC the leading network for four weeks in a row in summer this year. Comcast expects “The Voice” to be “an important cornerstone” for their content, thus helping them turn around the network.

Comcast and Microsoft Tie Up
Comcast also entered into an agreement with Microsoft to release TV entertainment services on the game console Xbox 360. It is expected that by the 2011 holiday season, Xbox Live users will be able to access Comcast content using their gaming consoles.

Comcast’s VoD Expansion
To expand their video-on-demand offering, Comcast recently announced plans to offer value-added services to their premium customers. As part of the offering, customers in Atlanta and Portland with HD TV Telecast facility will be able to watch new movies on their home televisions faster than it is available on other online sources or on DVDs. They will begin testing the service with the launch of the movie “Tower Heist,” which is being released November 4 and will be available to Comcast viewers by November 23. The service is a pricey one at $60 for a movie rented for unlimited viewing over a 48-hour period. Players such as Netflix release movies for streaming at least three months after a movie is released in the cinemas.

Comcast has surely cut down on that waiting period, but it is to be seen how many customers will be willing to pay that kind of amount for the comfort of watching a movie at home. Earlier, DirecTV’s similar effort for a movie rental priced at $30 did not go too well. DirecTV allowed viewers to watch movies within two months of their release in the movie theater.

Comcast’s stock is trading at $24.21 with a market capitalization of $66.6 billion. It touched a 52-week high of $27.16 in May of this year.

Viacom’s Financials
Viacom’s (NYSE:VIA) quarterly revenues grew 15% over the year to $3.77 billion and were ahead of the market’s expectations of $3.52 billion. EPS of $0.99 grew from $0.71 recorded a year ago and were higher than the Street’s expected $0.86.

Growth was driven by global ad revenues which grew 14% over the year $1.2 billion. By segment, Media Networks revenues grew 16% over the year to $2.39 billion. Worldwide affiliate revenues grew 19% to $971 million driven by growth in digital distribution revenues and rate increases.  Worldwide ancillary revenues were up 13% to $145 million. Filmed Entertainment revenues grew 13% to $1.41 billion owing to higher television license fees and home entertainment revenues.

For the quarter, Viacom repurchased 14.2 million shares for $700 million.

Viacom’s Digital Deals
Over the last quarter, Viacom has become more open to digital distribution deals. Besides the more recent one with Microsoft, they have entered into deals with Netflix and Hulu. Digital deals are expected to earn more than $100 million in revenues a year. Analysts estimate that digital deals come with margins as high as 75%. Further, they will also help Viacom expand their international presence. For instance, the recently renewed deal for Paramount Pictures and Netflix lets Netflix viewers access Paramount content in Canada. This is an important model for the cable TV players to maintain their presence in the digital-dominated market.

Viacom’s stock is trading at $52.50 with a market capitalization to $30.14 billion. It touched a 52-week high of $60.90 in May of this year.