Netflix Poised to Pass Comcast

Investors adored Comcast's (Nasdaq: CMCSA  ) quarterly report:

  • Revenue grew by 7%. Operating profits climbed even higher.
  • Comcast will dramatically beef up its share buyback efforts.
  • The cable giant's giving its dividend rate a welcome hike.

However, I skipped the celebration and went straight to the line buried in Comcast's report that mattered to me most: Its tally of video customers.

Despite the company's bubbly share price, cord-cutting continues at Comcast. The country's largest cable provider closed out the year with 22.8 million video subscribers. That may be a big number, but it remains 135,000 fewer than Comcast had on its rolls a quarter ago, and marks a whopping 757,000 net defections through all of 2010.

Comcast is making up for the shortcoming by selling more Internet access and broadband telephone services. It's also been migrating basic video accounts to pricier digital cable offerings. However, on a net subscriber basis, Comcast's still losing couch potatoes.

Where are they going?
It's a fair bet that Netflix (Nasdaq: NFLX  ) will have more premium subscribers than Comcast by the end of this very quarter. Netflix may only have 20 million subscribers, but if it tacks on another 3.1 million net new members, as it did during the holiday quarter, it will surpass Comcast to become the country's leading premium entertainment service.

The high end of Netflix's subscriber target for this quarter is 22.8 million -- exactly where Comcast is at the moment. But since Netflix has a history of issuing conservative guidance, I bet it'll surpass Comcast by the end of next month. Just wait and see.

Netflix won't be the only one trampling over Comcast this year. Satellite television juggernaut DIRECTV (NYSE: DTV  ) reports next week, and it has an outside shot at passing up Comcast, too. DIRECTV had 18.9 million subscribers in North America through the end of September. It's gaining the ground that Comcast is yielding. It has 493,000 net additions over the past year. The company would have to accelerate its growth to catch up to Comcast's falling numbers, but that certainly doable. If you count DIRECTV's 5.4 million subscribers in Latin America, the company would have actually overtaken Comcast early last year.

There's also Sirius XM (NYSE: SIRI  ) . The only game in town when it comes to satellite radio closed out 2010 with 20.2 million subscribers. It's targeting an audience of 21.6 million accounts by the end of this year.

Sirius XM has been conservative in its projections over the year and change, so the smart money would be wagering on the over in that bet. If Comcast sheds another nearly 800,000 video customers, and Sirius XM can get its premium radio rolls up over 22 million, we would have yet another company slipping ahead of the cable giant this year.

Sirius XM obviously isn't gnawing away at Comcast's TV watchers, the way Netflix and DIRECTV appear to be doing, but it represent yet another premium entertainment service growing while Comcast shrinks. Sirius XM has put together six consecutive quarters of sequential membership growth, mirroring the economic turnaround. What's Comcast mirroring, as it and most of its fellow cable providers continue to shed paying customers?

Are you still excited by Comcast's report? Today's premium entertainment golden child could soon settle for silver. By the end of the year, it may not even be fit to be bronzed.

How important is video customer growth for Comcast? Do you think DIRECTV or Sirius will pass it up by year's end? Share your thoughts in the comment box below.

Netflix is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber -- and shareholder -- since 2002. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (8)

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  • Report this Comment On February 18, 2011, at 11:43 AM, darkpoolsofs0ros wrote:

    such a biased attack. Can't even consider this a real report. Sounds more like a rant. No idea presented of the NBC deal to speak of. Only talking on and on about subscribers.

    What a tool of a writer we have here.

  • Report this Comment On February 18, 2011, at 12:44 PM, proudcableguy wrote:

    Unfortunately Rick Munarriz does not report on all aspects of Comcast. While subscribers are an important factor in the companies performance metrics, the vast diversity of its properties, services and market breadth are purposely overlooked. Comcast is making more and more money each year on a dwindling subscriber base. As the economy recovers over the next few years the subscriber numbers will reverse due to more folks employed and increased housing starts. The acquisition of NBCUniversal immediately adds over $10 billion a year in revenues and many more growth opportunities in the network and advertising arenas. With reduced spending in CAPEX the company, with its very diligent and wise mgmt team, will continue to meet or exceed Wall Street expectations for many years to come.

    C'mon Rick, report on all of the business segments and rethink bashing a solid and reputable company. Don't be a 'Fool'.

  • Report this Comment On February 18, 2011, at 1:47 PM, darkpoolsofs0ros wrote:

    and good luck watching live events on netflix, etc

    i love netflix as an additional media source, but these overthrow talking points are inane.

  • Report this Comment On February 18, 2011, at 2:12 PM, MonicaPell wrote:

    I agree with the last post. Netflix is a good additional media source for movies. for online TV, both on-demand and live tv, I would use TVDevo.com as a source. You still need a cable internet provider, but you can drop the TV portion of the bill.

  • Report this Comment On February 18, 2011, at 4:25 PM, broadbandbob wrote:

    Netflix average revenue per sub is ~$12 and falling, Comcast average revenue per sub is $133 and rising. How is total subscriber count relevant again?

  • Report this Comment On February 18, 2011, at 5:06 PM, HectorLemans wrote:

    Here's a chart comparing Comcast, Sirius, and Netflix subscribers from 2004 through 2010. Make of it what you will:

    https://spreadsheets.google.com/ccc?key=0AptdKyIu2kIQdHB6aDh...

  • Report this Comment On February 18, 2011, at 6:02 PM, HectorLemans wrote:

    @broadbandbob

    I think you're confusing ops profit per subscriber with revenue per subscriber for Netflix. Revenu/Sub was about $160 back in 2005 and was down to $108 in 2010 for Netflix. Earnings/Sub was about $10 back in 2005 and is now about $8.40

  • Report this Comment On February 19, 2011, at 1:46 PM, TMFBreakerRick wrote:

    Hector, that chart is very deceptive. It's not Comcast video subscribers (which were 21 million by the end of 2004), but ONLY the digital ones (which bascially come from Comcast existing video subscribers being converted over -- one way or the other).

    David Smith covered the Comcast earnings report itself -- including its many strengths. I'm just keying in on the cord cutting. If you think Comcast can continue to grow as its video user base shrinks over the long-term, we'll have to agree to disagree.

  • Report this Comment On February 19, 2011, at 5:30 PM, HectorLemans wrote:

    @Rick

    But don't you have to have digital video to have a DVR and get pay-per-view and other 'Netflix-like' services? I'm just trying to compare apples-to-apples in the chart.

    Not trying to be deceptive - don't own stock in any of those companies and probably never will.

  • Report this Comment On February 21, 2011, at 4:21 PM, Itsamays wrote:

    I'm not getting it Netflix vs. Comcast where is the comparison just because Nflix may have equal subscribers there is no way that has anything to do with Comcast, Nflx counts on Comcast to get its media thru!, along with other means, Comcast is still the largest Cable Co. in America. So if someone comes up with a way to get movies to subscribers cheaper than Nfx what becomes of Nx the stock it dwindles away to N-othing, can You say penny stock.

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