Cable giant Comcast on Thursday reported its first-quarter financials, including a better-than-expected profit at its entertainment arm NBCUniversal.
Kicking off earnings season for big Hollywood players, NBCUniversal, led by CEO Steve Burke, posted adjusted operating cash flow, the profitability metric the company uses, of $2.02 billion, compared with $1.62 billion in the year-ago period.
The company recorded operating cash flow growth in all divisions, with particularly strong gains in its film unit, but also in its broadcast TV, cable networks and theme parks segments.
The film unit's growth, nearly 121 percent, in the latest quarter outperformed that of all other units. The company cited the performance of of Fifty Shades Darker, Get Out and Split, as well as the continued success of Sing, which opened in late December. The inclusion of DreamWorks Animation also boosted revenue. Adjusted earnings before interest, taxes, depreciation and amortization in the film unit increased by $201 million to $368 million, "reflecting higher revenue, partially offset by higher programming and production costs," the company said.
Cable networks unit profitability rose 16.8 percent to $1.1 billion, reflecting a 7.6 percent revenue gain, partially offset by "a modest increase in programming and production costs," according to the company. Revenue benefited from higher distribution and content licensing and other revenue, partially offset by a 2.9 percent advertising drop as ratings declines outweighed higher ad rates. Distribution revenue increased 8.6 percent, "driven by contractual rate increases and contract renewals, partially offset by a decline in subscribers at our cable networks," the company said.
Broadcast TV earnings increased 13.4 percent to $322 million, thanks to higher distribution and content licensing revenue, boosted by higher retransmission consent fees, as well as content licensing revenue, which were partially offset by higher programming and production costs. Advertising revenue rose 0.3 percent, "reflecting higher rates, offset by audience ratings declines and lower volume," the company said.
Comcast also continued to add pay TV subscribers in the first quarter, namely 42,000, compared with 53,000 in the year-ago period. Telsey Group analyst Tom Eagan had predicted it would post a net gain of 37,000 video subscribers, but others on Wall Street had expected a gain of around 44,000.
Theme parks earnings increased 6.1 percent to $397 million on higher attendance and per-capita spending, partially offset by an increase in operating expenses, including pre-opening costs to support new attractions opening in Orlando this spring.
"2017 is off to the fastest start in five years," said Roberts. "We are reporting outstanding growth at cable and particularly NBCUniversal, which delivered 14.7 percent revenue growth and 24.4 percent adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] growth. These impressive results were fueled by exceptionally strong film performance, increased affiliate and retransmission revenues at our TV businesses and continued growth in theme parks."
NBCUniversal is planning an online video service that would bring customers programming from its broadcast arm NBC, as well as cable networks Bravo, SyFy and USA, according to a recent report. The launch of a stand-alone streaming service would boost the company's presence in the streaming race, where broadcast rival CBS in late 2014 launched CBS All Access to offer its programs for a monthly fee. NBCUniversal previously launched Seeso, a $4-per-month service for cult comedy and NBC classics, such as 30 Rock, in early 2016.
HBO, Starz and CBS-owned Showtime also have their own streaming services as traditional TV companies have taken on streaming giants Netflix and Amazon.
It may be a long time before the new service launches, given the regulations over how Comcast operates NBCUniversal. NBCUniversal was required to become a silent partner in the Hulu joint venture, for example, after it sold to Comcast.