With so much going on in the Pay-TV segment of the entertainment industry, competitors are finding it increasingly difficult to compete in traditional lines of businesses. As such, reinvention and renewal is now the name of the game.
As reported in our previous note, an extremely favorable catalyst for CMCSA occurred when the company acquired General Electric (GE)'s NBC assets. NBC Universal Picture's box office hit, such as "Fast and Furious 6", has proven that owning content developers is an extremely accretive strategy.
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The company has moved quickly to use their newly acquired content developer (NBC) to launch a number of innovative service offerings, including Streampix and X1. They have also reinvented themselves to deliver high-speed business internet services. These new offerings are expected to have positive contributions to the company's bottom line in the coming quarters.
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According to recent reports, it is rumored that CMCSA (along with co-owners News Corp and Walt Disney Co) might be seriously considering selling Hulu LLC, the internet-based video website. Previous attempts to divest themselves of this asset, and even to go public in an IPO, were less than successful. With a reported price tag of $1B being offered for the deal by competitor DTV, a sale could be a positive catalyst for CMCSA's share price.
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Clearly the "reinvent to stay relevant" theme has resonated with CMCSA's management, as the company moves to evolve from a Cable/Pay-TV company into a global media and technology company. The recent move to partner with Cisco WebEx in delivering online meeting, collaboration and file-sharing capabilities to Small and Medium Businesses (SMBs) is bound to be a great catalyst for future earnings.
Being the number one Pay-TV company in the world (over 22M subscribers) and the top broadband service provider in North America (upward of 19.4M subscribers), should make CMCSA pretty invincible one might think. However, as growing numbers of individuals and households decide to "cut the cord" and go wireless/mobile, CMCSA may face a challenge of subscriber erosion. If that happens, and if the company does not react quickly to stymie the erosion, it could prove to be a negative influence on its future growth and earnings.
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