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What's Good for Comcast Is Good for Disney

By Rick Munarriz - Feb 3, 2016 at 11:34AM

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Comcast's great theme park and cable TV numbers bode well for Disney's quarterly report on Feb. 9.

Image source: Universal Orlando.

Sometimes the friend of your enemy is also your friend. Comcast (CMCSA 0.66%) (NASDAQ: CMCSK) posted encouraging quarterly results on Wednesday morning, and it could mean a strong showing out of Disney (DIS -1.20%) when it steps up to the plate to deliver fresh financials next week. 

Comcast and Disney compete on more than one playing field. Theme park fans know how fierce the battle between Disney World and Comcast's Universal Orlando is in Florida, a fight that will only intensify in California when Universal Studios Hollywood opens The Wizarding World of Harry Potter in two months within a reasonable drive of Disneyland. 

Disney and Comcast also trade punches as two of the major network operators. Disney owns ABC. Comcast owns NBC. Then we get to the film studios, where Disney and Universal scored all six of last year's highest-grossing movies based on domestic box-office receipts, with three movies apiece.   

Knowing all of this leaves Disney investors paying attention to Comcast's strong quarterly showing this morning, and thankfully, the good news for Comcast won't necessarily be coming at Disney's expense.

Let's start with the nugget that's been making headline waves around the financial news market: Comcast had its strongest quarter for video customer net additions in more than eight years. Comcast closed out 2015 with 22.383 million cable television accounts, 89,000 more than it had just three months earlier. That tally has been negative more often than it's been positive in recent years as millennials "cut the cord" and rely on streaming services or other forms of in-home entertainment. 

This is great news for Comcast, of course. Cable television is its flagship business. However, this is also welcome news for Disney. Disney owns many cable properties, including Disney Channel and ESPN. It was actually a slide in ESPN subscribers that sent Disney stock lower this summer. An uptick at Comcast doesn't mean ESPN subscribers are climbing again. If Comcast merely took market share from other cable and satellite television providers, it would be a zero-sum game. However, it does offer hope that the perpetual decline in premium TV accounts may have bottomed out, if not started to turn around. That's a pretty big deal for Disney since a lot of its ESPN content is in the form of long-term contracts, where costs inch higher with every passing year. 

Then we get to Comcast's theme parks division. The media giant just topped $1 billion in theme park revenue for the first time in a single quarter, 39% ahead of where it was during the prior year's holiday quarter. The growth wasn't all organic; more than half of that growth came from the acquisition of Universal Studios Japan, but back that out, and theme park revenue still climbed 15.5% for the quarter. Most of that money is being made in Universal Orlando, and what's good for Harry Potter can also be good for Mickey Mouse.

The magnetic nature of The Wizarding World of Harry Potter -- the ambitious expansion that has added themed lands to both of Universal Orlando's theme parks (and will roll out in California on April 7) -- is that it's drawing tourists to Central Florida. They'll stay for about a week, and that means checking out more attractions than just Universal Orlando until Comcast builds out its resort more in the coming years.

Disney has been slow to expand its property the way Comcast has in recent years, but it was actively rolling out Star Wars-themed attractions during the quarter. It's also been promoting the rides, shows, and nighttime attractions that were going away after the holidays at Disney's Hollywood Studios to make room for Star Wars Land in a few years.

Comcast had a strong quarter today, and the seeds are in place for Disney to follow suit in six days. 

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The Walt Disney Company Stock Quote
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