A war is brewing for media supremacy in the realm of Internet streaming. And Comcast (CMCSA) is now at the center of it. But will the company win? And to what extent will Comcast go to assure a victory and secure a foothold in a market dominated by Netflix (NFLX)?
These questions will be answered when Comcast reports fourth quarter fiscal 2018 earnings results before the opening bell Wednesday. The hottest topic surrounding Comcast’s earnings will be what the company plans to do with U.K.-based media company Sky, which Comcast won in — what can only be described as — a bruising takeover fight with both Disney (DIS) and 21st Century Fox (FOX).
After losing 15% of its value in 2018, Wall Street is eager to hear what Comcast management plans to do with its prize assets and how the investment can help reverse or offset waning satellite/cable TV business.
"The Sky strategy remains unclear," JPMorgan said in a Jan. 2 report. The world’s insatiable appetite for on-demand video streaming has shifted the power landscape from the traditional titans to the likes of Netflix, Hulu and Amazon (AMZN).
But the battle has only just begun. And what Comcast says Wednesday in terms of its plans to offer relevant streaming services may allay fears regarding its ability to remain competitive. As such, the main interest from investors will center on the company’s strategy. After such a heated fight to secure Sky investors are hoping for a radical shift, and anything suggesting it will be “business as usual” will be perceived as a disappointment.
For the three-month period that ended December, Wall Street expects the company to earn 62 cents per share on revenue of $27.57 billion. This compares to the year-ago quarter when earning were 49 cents per share on $21.91 billion in revenue. For the full year, earnings are projected to rise 23.7% year over year to $2.55 per share, while revenue of $93.95 billion would rise 11.10% year over year.
U.S. cable/satellite operators such as AT&T-owed (T) DirecTV have been shedding subscribers at an alarming rate, continuing the cord-cutting phenomenon. This is where consumers are canceling their cable and satellite connections that can cost more than $100 per month on average, in favor of cheaper on-demand streaming entertainment alternatives that range from $9 to $12 per month.
What’s more, while the cable/satellite market continues to shrink, the streaming market is enjoying boundless growth. This is where Comcast’s Sky acquisition can help. When combining Sky’s satellite TV, broadband, phone and internet streaming customers, the company has 23 million subscribers. As with Netflix, Sky produces original content, which includes movies as well as news programming.
And unlike Netflix, Sky — which operates pay TV and streaming services in the U.K., Ireland, Italy, Germany and Austria and in Spain — also delivers sports content, securing broadcasting rights to sports in Europe, mainly soccer.
All told, while Comcast has been silent about its plans to this point, the company has tons of options to compete with the streaming leaders and, more importantly, is in a far better position today than a year ago. Comcast’s main job Wednesday is to convince investors of this by outlining its streaming strategy and assure that “the Sky is the limit” for Comcast’s future — if you will allow the pun.