Comcast, the country’s largest cable operator, predicts that television groups like HBO and CBS will face steep challenges introducing streaming services that do not require cable subscriptions and that people will continue to pay for a bundle of television and Internet services in the years to come.
Stephen B. Burke, chief executive of NBCUniversal, said he was “surprised” by announcements last week that both HBO and CBS would start subscription streaming services. He said that HBO risked “cannibalizing” its existing, profitable business because the premium TV network would have a hard time luring new streaming subscribers while not cutting into its base of customers who pay for cable or satellite subscriptions.
CBS has long defended traditional television business models, he said.
“I don’t think distributing to consumers via the Internet is an easy thing to do,” Mr. Burke said during a conference call on Thursday. “I think it’s a voyage that if you’re successful like Netflix, can be a way to create a lot of value, but it’s not an easy thing to do.”
The comments came as Comcast, the cable and entertainment conglomerate, reported a 12 percent increase in adjusted earnings in the third quarter, propelled by growth in the company’s high-speed Internet business and the NBC broadcast television network.
Total revenue increased 4 percent, to $16.8 billion, compared with the period a year earlier, the company reported. Net income for the quarter was $2.63 billion, up 49.7 percent from the period a year earlier because of the one-time addition of income tax adjustments and other items. Excluding those additions, earnings per share increased 12.3 percent, to 73 cents.
In recent days, questions about the health of the cable business have loomed over Comcast and its rivals after the announcements by both HBO and CBS. The introduction of these new options for watching TV has caused concerns that more people will cancel their cable subscriptions, or never subscribe at all, because they would be able to watch the shows they wanted to watch — when and how they wanted to watch them — via the web.
HBO and CBS executives have said that the new services would not cannibalize their business, but rather provide a new route to distribute their programming to people who don’t subscribe to traditional TV packages. “We simply don’t believe that an HBO stand-alone product is anything other than a win-win for us and for our distributors,” Richard Plepler, chief executive of HBO, said in a statement. “This isn’t cannibalization, it’s growth.”
Cable companies like Comcast have started selling more flexible subscription offerings beyond the standard bundles of television networks they sell. Comcast executives pointed to its “Internet Plus” offering as an example. The service includes a smaller television package, HBO and high-speed Internet service.
“All companies are trying to figure out how to reach all customers,” said Brian L. Roberts, the chief executive of Comcast. “Our existing business model is very strong. This quarter, last quarter, and, probably, future quarters will show that many people want these bundles.”
Cable companies also are placing an increased emphasis on selling Internet service, which viewers need to watch streaming video.
Comcast has said that its Internet business at some point will overtake its video business, and that tipping point is likely to occur soon. Comcast has about 22.4 million video customers and 21.6 million high-speed Internet customers.
Comcast lost 81,000 video customers in the quarter, an improvement from its loss of 127,000 video customers during the same period last year. Meanwhile, the company scored an increase in Internet customers, adding 315,000 high-speed Internet customers during the quarter.
Revenue in Comcast’s cable group increased 5.2 percent, to $11 billion. Sales in its NBCUniversal entertainment group inched up 1.2 percent, to $5.92 billion, with increases in its broadcast television and theme parks groups offsetting declines in its filmed entertainment business.
Advertising results were mixed for the quarter, with the cable networks posting a 4.6 percent loss and broadcast television networks showing a 4.4 percent increase. Industrywide, cable networks have faced ratings and advertising pressure.
Comcast is awaiting regulatory approval for its $45 billion merger with Time Warner Cable, which would combine the two largest cable operators in the United States. The company said that it expected the deal to close in early 2015 and that costs related to the merger were about $77 million for the quarter.
Authored by Emily Steel via nytimes.com.