Bigger piece of pie going to Comcast

Feb 11, 2002  •  Post A Comment

Cable interconnects are becoming big business for Comcast Corp., which says it is significantly cutting into local TV broadcasters’ already weak advertising business this year.
“There is no question we are taking market share at a rapid rate from the broadcasters in the places where we have major interconnects in some 15 or 20 markets,” Comcast Executive VP Steve Burke said during the company’s fourth-quarter earnings call last week. “In most of the markets we’re operating in, the share change is rather dramatic, which leads me to believe that once you get to a more normalized economy, you’re going to see us grow pretty dramatically.”
Comcast’s interconnects take between 5 percent and 10 percent of the ad revenue in markets as large as Philadelphia, Washington, Detroit, Baltimore, Nashville and Albuquerque. Smaller markets include Flint and Saginaw in Michigan, which are interfaced. Comcast’s interconnect business has grown as much as 12 percent in its hometown of Philadelphia against an overall 20 percent market decline in advertising during the current recession. Local TV broadcasters also have been losing ad dollars to their own networks as national spot and scatter pricing overlaps in a down market.
“Now that we have this ability to offer advertisers the choice to cover an entire [designated market area], they are viewing us as a viable alternative to broadcasters,” Mr. Burke told Electronic Media.
Comcast recently appointed Charlie Thurston, formerly head of the Los Angeles interconnect, to oversee the entire operation.
“The game here is for one company to speak for the majority of subscribers in a DMA so an advertiser gets the ad placement at the right time with one bill,” Mr. Burke said. “That’s winning in the marketplace, but that’s overshadowed right now by the overall ad market decline.”
Interconnect advertising is a growing part of Comcast’s overall advertising revenue base, consisting mostly of regional and national ad income. Overall, advertising represents about 8 percent of Comcast’s total cash flow.
Comcast reported a 3 percent decline in fourth-quarter operating cash flow to $654 million, due in part to the conversion of its subscribers to its own branded high-speed Internet access service from the defunct Excite@Home.
Revenues increased 17 percent to $2.8 billion. The company posted a loss of $321 million, or 34 cents a share, from a profit of $778.5 million, or 80 cents a share, a year earlier due to a one-time gain.
Comcast said it expects cash flow to grow between 12 percent and 24 percent on revenue growth of 10 percent to 12 percent. The company gave projections for new services that were more conservative than expected, saying it could add between 600,000 and 700,000 new digital subscribers and between 400,000 and 500,000 high-speed subscribers in 2002.