Comcast chairman and CEO Brian Roberts at an investor conference on Tuesday lauded NBCUniversal for exceeding all his performance expectations and demoed the cable giant's beta testing phase for integrating Netflix on its set-top boxes.
Speaking at the Goldman Sachs Communacopia Conference in New York in a session that was webcast, he opened the Netflix app on a Comcast TV screen to show how the Netflix integration, which Comcast is rolling out in a beta test in the next few days to X1 users, works. "Netflix, as we know, is wildly successful, and it has pretty much got content that you don't get with your [Comcast] X1 existing subscription," he said.
"[Netflix CEO] Reed Hastings and myself spent some time together," which allowed them to put together a service that would serve consumers, Roberts said when asked how the deal came about. He acknowledged, "We always had tremendous respect, I think, for both organizations. We occasionally didn't see eye-to-eye on everything."
"I give him a lot of credit for helping make it happen," he added about Hastings. "Our organization has made a conscious decision that we are going to aggregate other people's content, some of which we sell directly, some of which we don't." He said the companies have gotten "a lot closer," adding "I'm really pleased with the relationship." Roberts also said he didn't realize how much kids content was on Netflix until Comcast purchased Dreamworks Animation.
He said the Netflix integration will roll out by Thanksgiving across the Comcast footprint, and that the cable giant is talking with other streaming providers about offering them as well now that it has developed a blueprint for it.
How does he feel about "skinny" pay TV bundles? "I don't know that that's really what people want," Roberts said. Some want to pay less, but "I don't know too many programmers who want to go a la carte" and feel that works for their business, he added.
Comcast and some other big cable operators have had strong pay TV subscriber trends. Comcast recently reported the loss of 4,000 video subscribers in the quarter ended in June, marking its best second-quarter result in more than 10 years. It had added 53,000 pay TV subscribers in the first quarter, marking the first time in two years that the cable giant had grown its video customers for two quarters in a row.
Asked about Comcast's strength, Roberts said: "We are very pleased to tell you our momentum is continuing" in video and beyond because of service, value offered to consumers and other reasons. "The team is doing a great job making our product better."
While he said he couldn't comment on competitors, he said his team often gets positive comments about its offers from industry folks, adding: "I don't think anyone has the scale or the focus." He said the company now has about 10 million voice remotes in Comcast homes and will by year-end have its X1 interactive TV platform in 50 percent of households.
Roberts also said his team was "thrilled" to say it has more than doubled the cash flow at NBCUniversal since buying it a few years ago. He said NBCUniversal's performance across businesses has been "beyond even my own highest expectations."
NBC just won the third season in a row in the 18-49 demographic, Roberts pointed out. Telemundo has tripled its ratings and has beaten Univision in the young demo for several weeks in a row, he added. The film business will have the three most profitable years in its history, with "sustainable" franchises boosting its performance, the latest being The Secret Life of Pets. The CEO also lauded Sing, which just screened at the Toronto film festival, as possibly the best animated movie Chris Meledandri has ever made. "Film is a great shape. Jeff Shell is doing a super job," Roberts concluded.
The Comcast boss reiterated that the cable networks business has become more challenged but lauded a low teen percentage increase in advertising rates in this year's upfront for NBCU's cable channels. Scale matters in the business, he added.
Roberts also again lauded the Summer Olympics in Rio as the most profitable for the company ever by a wide margin despite lower ratings.
NBCUniversal CEO Steve Burke had told another conference last week that the entertainment company made $250 million-plus on the Rio Summer Olympics despite lower ratings, a record for the company and well ahead of the $120 million profit from the London Summer Games in 2012. Asked how he views the lower audience trends since NBCUniversal paid $7.75 billion for Olympics rights from 2022 through 2032, Burke cited strong digital viewing trends and said the Rio audience was down by less than 10 percent when factoring in cable and streaming. Overall, he acknowledged that London marked the "high-water point" in primetime Olympics viewing, but added that he was optimistic about future Olympics, mentioning that advertisers were looking forward to returning. "We are not in any way concerned," he concluded.
Burke had said last week that Spanish-language TV arm Telemundo has a "huge opportunity" as it was "essentially making no money" when Comcast bought NBCU, while Univision made about $1 billion a year. With Telemundo beating Univision in the adults 18-49 demo in primetime for the past seven weeks, Burke said there was "a "big monetization opportunity." Univision also gets much higher retransmission fees, he said, meaning Telemundo also has more upside here. He concluded that over one to three years, "Telemundo should be a lot more profitable" if it keeps up the ratings momentum.
Burke had also discussed his take on OTT services and NBCUniversal's interest in having its channels on them. "OTT sounds like a better business than in reality it is," he said. He added that the company wants to make at least the same amount in OTT deals as in traditional pay TV deals. "I think OTT is happening.... But I think it's a pretty challenged business model, and I'd be surprised if it flies out of the gate with a big number," he asserted. He argued that only few people who have a pay TV package with 200 channels would want to pay about $45 or more for just 25 channels.
Burke said when Comcast bought NBCU, the studio had one franchise, but that has grown to eight. "All of our franchises are still on the upswing," he added. Burke had also discussed the recently closed $3.8 billion acquisition of DreamWorks Animation, saying the company was bullish on animation, calling it "the best of the best."
Roberts acknowledged that he has been in a senior position at Comcast since the conference started 25 years ago, when he was president. Investing for the long term has been a continued focus for the firm, he said. He also lauded the acquisitions of AT&T Broadband and NBCUniversal, saying that they "gave us scale" and "allowed us to pivot." And he said the company increasingly sees itself as an innovation company at the intersection of technology and media that "brings you to the moments in life that matter the most," from the Olympics to attending theme parks, seeing movies or other things.
More to come.