Bad Economy May Distract Public From DTV Switch, Says Comcast Executive
The worsening economy probably will distract TV viewers from preparing for the February digital switchover, Comcast President Stephen Burke told investors Wednesday. “With everything else going on, people are going to be distracted,” Burke said. “A greater percentage will wait until the last minute” before taking the steps necessary prepare for the switch, he said. Comcast has been marketing a special DTV switch promotion to analog over-the-air viewers, offering a year of free basic cable service to customers that also buy its phone or broadband service (CD Oct 9 p13).
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Some new customers have been attracted by the offer, Burke said, but the economy is a wild card: “Our bet is it just makes people distracted and they make their decision later than they would have.”
Comcast’s own digital conversion will spill over into 2010, Burke said. The company is greatly reducing the amount of analog programming it carries in up to 20 percent of its markets this year and will give many subscribers a digital- to-analog converter so they can keep receiving that programming on analog sets (CD May 2 p5).
Systems that go through that conversion will see their profitability drop for a time, he said. Portland, Ore., “is getting ready to go as we speak with the new DTA boxes which are now in stock and in test homes,” Burke said. Installing all those boxes in customer homes will take time and an increased payroll, he said. “It clearly increases headcount and marginally decreases cash flow when you take a market to DTA.”
Meanwhile, Comcast will begin to put TiVo software on some of its leased DVR set-top boxes in more markets next year, Burke said. Chicago will probably be the first market outside of New England, where the company has been testing the system. Those trials have been going well, he said. Comcast’s Chicago system uses Motorola equipment, so the TiVo product there will run on Motorola boxes, a spokeswoman for the cable operator said. “We've agreed to work together to bring the TiVo service to other Comcast platforms, including Scientific-Atlanta boxes, but it’s so early in the process that it’s premature to discuss timelines.”
AT&T now is the more formidable rival of phone companies offering pay-TV service, Burke said. “We're actually seeing more competition from AT&T than from Verizon right now and that was the exact opposite a year ago,” he said. “AT&T has so much broader a footprint that we think they're having a greater effect on our business than Verizon.” Burke was quick to add that Comcast is taking more phone and broadband customers away from those companies than it’s losing video subscribers to them.
Despite the credit crisis and worsening economy, Comcast’s balance sheet remains strong, Chairman Brian Roberts said. “We do not need to access the capital markets any time for the foreseeable future,” he said. “We have significant free cash flow and liquidity to internally fund all of our operations.” Comcast Q3 sales increased 10 percent from a year earlier to $8.5 billion. Quarterly profit gained 38 percent from a year earlier to $711 million.