Cable king Comcast (CMCSA 1.68%) beat on the top and bottom lines when it reported fourth-quarter results, and also raised its dividend, but the more interesting news for many onlookers is that the company plans to launch a streaming service built on its NBCUniversal catalog.
In a world that already has Netflix (NFLX +1.53%), Hulu, CBS All Access, and a host of other options including those soon to come from Disney, the questions that Motley Fool Money host Chris Hill and senior analysts Aaron Bush, Ron Gross, and Jason Moser dig into in this segment of the podcast are simple: Is this necessary? And what is the future of streaming going to look like? They also ponder where Comcast's offering will fit into the mix, and possible trends and strategies that could allow media giants to prosper.
Check out the latest Comcast earnings call transcript.
A full transcript follows the video.
This video was recorded on Jan. 25, 2019.
Chris Hill: Comcast's fourth-quarter profits and revenue came in higher than expected. The company also raised its quarterly dividend. Aaron, this is a good quarter for a company worth $160 billion. I think it's fair to say that for you and me, these results were not the most interesting part of the conference call.
Aaron Bush: Right. Maybe unsurprising, maybe surprising to some, they're looking to launch their own streaming service using the NBC Universal brand. I'll give them some credit because NBC has a pretty deep catalog. They have a lot of sports and events and stuff that they could put to work. But how many of these streaming services do we need?
Ron Gross: A dozen.
Bush: Well, maybe. One for each of our listeners, right? [laughs]
Jason Moser: Very well played!
Bush: But, I think what we'll probably see is, it will succeed to some degree. But really, what they're trying to do is be a mini-Hulu. It'll probably play out at a CBS All Access scale. Really, they're going to be one of many. When I think about what they're doing, it makes me that much more bullish about Netflix.
Hill: Comcast was very clear that they're looking at the first half of 2020 to launch this. As you said, they have a lot of properties, obviously, with NBC, they also have Universal Pictures, DreamWorks Animation, they've got the news properties, they've got sports, and every Olympics from now until the end of time. They have a lot of IP. But it really does seem like we are slowly, methodically moving, maybe five years from now, maybe sooner, to a world where everyone just takes their own shows and keeps them to themselves. If you want Disney shows, the only way you're going to get them is on Disney. Am I wrong? Is that the most probable outcome five years from now?
Bush: I think that companies are realizing that having that direct customer relationship is valuable. There's also that saying that the two ways to create value in business are by bundling and unbundling.
Gross: That's how you be a good investment banker. You roll them up, you take them apart, you roll them up, you take them apart.
Bush: And if you look at the history of entertainment and cable, it really has been that story. Cable was all about bundling things together to create value. Now, we're at a stage where things are increasingly getting unbundled for a reason. But at a point, when there are too many services out there, we'll come back to, "Well, we need to bundle things all over again," which leads to more dealmaking, all types of moves that could possibly be made.
Moser: I tend to agree with the bundling thing there. We saw early on how it was so convenient to have just Netflix, you could basically watch what you want. But then, more competitors enter the fray. New services enter the fray. And you're seeing things like with YouTube and Hulu live offerings, that bundling can work as long as you're bundling the right things and offering it for a reasonable price. I think Hulu and YouTube are doing that. Aaron and I were talking about this earlier today, it's going to be really interesting to see in the coming five years if Netflix doesn't pursue more of these live and sports-types offerings. We're seeing a lot of demand for that kind of stuff out there. Hulu just raised the price of their live TV offering, and I think they're going to be able to do that without much of a problem at all.
I agree with Aaron. The advantage Netflix has is so big now. They have so many subscribers. It's going to give them a chance to try a lot of different things. Really, we're seeing that you need to be more things to more people.
