This Company Is As Unavoidable As It Is Unloved

By Greg McFarlane AAA

With billings of $65 billion last year, Comcast Corp. (CMCSA) is the largest media company in the world, the kind of conglomerate so large that it’s easy to lose track of the dozens of other household corporate names that operate under it. Despite Comcast’s publicized and documented missteps – by consensus it’s the worst company in America – a general feeling of customer dissatisfaction isn’t enough to sway the numbers. Comcast provides critical services to tens of millions of customers, resulting in a market capitalization on the order of $135 billion. That’s likely to rise in the near future, and significantly.

Only Getting Bigger

In early 2014 the company announced a $45 billion purchase of rival Time Warner Cable Inc. (TWC), solidifying Comcast’s position as the biggest company of its kind.

Comcast is known mostly from its eponymous business as a cable operator, providing a way for customers to watch TV without using satellite and get online without having to move to an area where some other internet service provider enjoys the local monopoly. Cable operations, which include residential high-speed internet, TV, phone service, and the equivalent offerings for business, are responsible for 65% of Comcast’s consolidated revenue and 80% of operating income.

Not Sexy, But Very Profitable

Business-to-business is as uncharismatic a branch of services as you’re going to find offered by a company more closely associated with TV shows and thrill rides. Yet signing up offices for web hosting and static IP addresses is where Comcast shines. Should the Federal Trade Commission approve the Time Warner Cable merger – more on that in a moment – the combined company will account for more than $5 billion in revenue from business services alone.

Yet cable is just one part of Comcast’s business, albeit a large one. The company has two major divisions: Comcast Cable and NBCUniversal. With annual revenue of $24 billion, the latter is not only the parent company of its namesake television network, but of a far-reaching cavalcade of varied entertainment businesses.

A Cable and TV Powerhouse

A supermarket list of networks owned by NBCUniversal might not be the most poetic method of showcasing the company’s range, except that the networks are so many and so diverse. In addition to the National Broadcasting Company itself – America’s oldest television broadcast network, and available on just about every functioning TV in the nation – NBCUniversal also owns news/opinion cable network MSNBC; financial network CNBC; the general-interest USA Network; Telemundo, the world’s second-largest Spanish-language network; and various networks of smaller and more focused interest, including The Weather Channel, E!, Syfy, The Golf Channel and Bravo.

As the second half of NBCUniversal’s composite name indicates, the Comcast subsidiary is also parent to the Universal motion picture and theme park operations.

Universal Pictures is one of the Big Six studios, releasing a major feature approximately every three weeks. Comcast’s movie division grossed $1.4 billion in North America last year, and more than $3.5 billion worldwide, both company records. That placed Universal third among the Big Six, although rankings can change on the strength or weakness of a single release. Case in point: Universal ranks fifth in box office totals through the first half of 2014, but would rank first on a per-feature basis. Either way, Universal is on pace to break its own record by year’s end.

Healthy Theme Park Revenue

It might be surprising to know that Universal’s theme park business, which is of course concentrated in select cities, generates more revenue for Comcast than does its domestic film business, whose reach is…well, universal. Universal maintains theme parks in Orlando and Hollywood, while licensing the Universal name to third-party operators in Osaka and Singapore. About 35 million people a year visit the theme parks, which in 2013 generated $2.2 billion in revenue and $1 billion in cash flow from operations.

Comcast has relatively smaller businesses too, which might be notable in absolute terms but which get lost in Comcast’s all-encompassing shuffle. Among those businesses is Comcast Spectacor, a joint venture that includes the National Hockey League’s Philadelphia Flyers, their arena (The Wells Fargo Center), and the management of various other sports venues ranging from small-town convention centers to stadia that have hosted Super Bowls. Comcast owns 5/8 of Comcast Spectacor, meaning the latter is responsible for about $2.5 billion in annual revenue for the former.

The Bottom Line

Even with a largely indignant customer base, Comcast has many of the criteria needed for a successful multinational. A high-volume, high-markup service; plenty of leverage, operating as the one conduit for internet service in most major metropolitan areas; and a “cozy” relationship, if you will, with the politicians who have a bearing on the company’s ultimate reach and influence (few companies or industry organizations spent more on lobbying last year than Comcast's $18.8 – a good portion of which on former politicians and at least one FCC official). With a strong capital surplus and consistently augmenting retained earnings, Comcast continues to represent long-term value for the committed investor.

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