Can Comcast Survive 5G and Cord Cutting?
These are dark days for Comcast Corp (NASDAQ: CMCSA). Between 2nd Quarter 2018 and 2nd Quarter 2019, the cable and internet giant lost 480,000 pay TV subscribers.
In detail, Statista estimates Comcast had 21.64 million video subscribers in 2nd Quarter 2018 and 22.12 million video subscribers at the end of 2nd Quarter 2019. Given those numbers, I estimate Comcast lost an average of 40,000 video customers a month over the last year. To clarify, I arrived at 480,000 by subtracting 21.64 million from 22.12 million, and 40,000 by dividing 480,000 by 12.
Disturbingly, my estimate is probably too low. Comcast lost 121,000 TV customers in 1st Quarter 2019, The Philadelphia Inquirer estimates. Additionally, Cord Cutters News estimates Comcast lost 224,000 residential video subscribers in 2nd Quarter 2019.
Cable Television is dying – can Internet Save Comcast?
Thus cable television is dying before our eyes, if Cord Cutters News and The Philadelphia Inquirer’s figures are accurate. Importantly, AT&T (NYSE: T) lost 778,000 TV subscribers in 2nd Quarter 2019, Cord Cutters News claims.
Strangely, there is a lot of good news for Comcast these days. For instance, Comcast added 181,000 wireless customers and 209,000 internet customers in 2nd Quarter 2019, Cord Cutters News claims. Plus, The Philadelphia Inquirer estimates Comcast added 375,000 broadband customers in 1st Quarter 2019.
Therefore, Comcast is in the weird position of dealing with dramatic growth and market collapse at the same time. America’s couch potatoes are more addicted to video than ever but they no longer want to watch what is on cable.
Is Anybody Watching Cable TV?
Interestingly, the data shows the question is “anybody watching cable TV anymore” is a valid one.
For example, AdWeek estimates the viewership of one high profile cable network; CNN, fell by 32% between July 2018 and July 2019. If AdWeek’s estimate is correct, CNN lost one nearly third of its viewers in a year. In addition, Comcast’s news channel; MSNBC, lost 20% of its prime-time viewers between August 2018 and August 2019.
Tellingly, America’s most popular cable show; Fox’s Hannity averaged 3.3 million viewers in July and August 2019, Deadline estimates. Therefore, the top cable program’s viewership is a little over 1% of America’s population.
Tellingly, America’s most popular cable show; Fox’s Hannity averaged 3.3 million viewers in July and August 2019, Deadline estimates. Therefore, the top cable program’s viewership is a little over 1% of America’s population.
Cable Television’s Audience is Dying Off
Comcast has a serious problem that will grow in coming years as the older Americans who watch cable TV die off.
To elaborate, Marketing Charts estimates the average age of a traditional television (the box, or screen, in the living room) viewer in America in 2018, was 56. Thus, televisions main market is Baby Boomers, or Americans aged 54 to 73.
Yet Incendar estimates one Baby Boomer dies every 18.4 seconds and 4,701 Boomers die a day. Thus, I estimate 1.716 million Boomers are dying each year, and around 142,989 Boomers are dying each month – if Incendar’s figures are accurate.
In addition, the data shows younger Americans no longer watch cable. For example, the number of adults aged 25 to 54 who watch the most cable network, the Fox News Channel, fell by 11% between July/August 2018 and July/August 2019, Deadline estimates.
How 5G can Make Things worse for Comcast
Incredibly things could soon get worse for Comcast. To explain, Verizon (NYSE: VZ) hopes to offer 5G (five gigabyte) wireless in half of American cities next year.
Verizon CEO Hans Vestberg tells CNBC his company plans to roll 5G out in over 34 cities in 2020. To explain, 5G is a wireless service that can transmit more data at a higher speed than existing systems.
I think the 5G expansion threatens Comcast because a 5G connection could allow people to download streaming video without a wire internet connection. Consequently, tens of millions of Americans could soon have no reason to send Comcast $50 to $100 a month for internet service.
Why Cable TV is Dying Fast
Moreover, widespread 5G will give many more people a reason to ditch cable. To explain, a guy who only watches sports no longer needs to order several hundred channels to see his team. Instead, the guy can order a digital sports service that shows just the games he watches.
For instance, a pro football fan can catch all the action he wants through the NFL’s app and website. Meanwhile, a news junkie can forgo a cable subscription and watch all the news she wants on YouTube and apps like CBSN without paying a cable bill.
Under these circumstances, cable personalities like Sean Hannity, Anderson Cooper, and Tucker Carlson will look for new gigs in a few years. Notably, one of the most popular YouTube Interview shows; The Joe Rogan Experience attracts 3.3 million subscribers, which rivals the viewership of Fox News, Tubefilter claims.
Is Comcast Making Money?
Oddly, the Comcast Corp’s (NASDAQ: CMCSA) revenues are growing despite cable TV’s imminent demise. In fact, Stockrow estimates Comcast’s revenues by 23.57% in the quarter ending on 30 June 2019.
Impressively, Stockrow reports Comcast made a gross profit of $15.327 billion on revenues of $26.858 billion during that quarter. Moreover, Comcast made an operating income of $5.356 billion and net income of $3.125 billion on those revenues.
Additionally, Comcast had an operating cash flow of $14.271 billion and a free cash flow of $3.996 billion in that quarter. However, Comcast is not keeping much of that cash. For instance, Comcast had cash and short-term investments of just $3.913 billion on 30 June 2019.
Thus, Comcast is a fast growing company that runs a lot of cash through its till. Yet Comcast is not a cash rich company.
Is Comcast a Value Investment?
Naturally many people will wonder if Comcast is a value investment. For instance, Comcast shares were trading at $46.04 on 10 September 2019.
In contrast, streaming video service Netflix’s (NASDAQ: NFLX) shares were trading at $283.55 on the same day. Ironically, Netflix pays no dividend while Comcast paid a quarterly dividend of 21₵ on 2 July 2019.
In addition, the Comcast dividend grew by 2₵ in 2019. To explain, Comcast paid a 19₵ dividend on 31 December 2018. Consequently, Comcast shareholders received a dividend yield of 1.81%, an annualized payout of 84₵, and a payout ratio of 33.2% on 10 September 2019.
Is Comcast a Good Dividend Stock?
In the final analysis, I consider Comcast a good dividend stock that is experiencing significant growth. Thus, Comcast is a good value investment because its stock is cheap and makes money.
However, the risks Comcast Corp (NASDAQ: CMCSA) is facing are great. Thus, Comcast is decent value investment but those who own Comcast could need to sell it fast soon.
