The business world is dynamic and increasingly changing due to technological innovation. Business must analyze their markets and identify significant changes in them, such as consumers changing preferences. Understanding the markets may also better place companies in a better position to put business strategies in place to ensure that they are better prepared for the uncertainties in the future and that they remain competitive in the business environment. The following assignment aims to review Comcast 10-K, provide analysis on the firm, identify the relevant markets/industries for Comcast, and explain the significant changes occurring inside them and what factors are currently affecting or may potentially drive them.
Comcast 10-K and Analysis of the Firm
Comcast Corporation specializes in television and media broadcasting services. The company has customers worldwide and provides television programming, cable television, video streaming, and high-speed internet and communication services (Comcast Corporation, 2018). As a global technology and media company, Comcast has three primary businesses: Sky, NBC Universal, and Comcast Cable. Comcast Cable operates under the business segment Cable Communications (Comcast Corporation, 2018). NBC Universal business operates under four business segments: Broadcast Television, Cable Networks, Theme Parks, and Filmed Entertainment. The Sky business functions as a single business segment.
An Overview of Comcast Business Segment
Cable Communication Segment
This business segment provides video, security, voice, and automation services as well as high-speed internet in the United States (Comcast Corporation, 2018). The services are offered individually or as a bundle at a discounted rate to business customers and residential customers. Business customers and residential customers are the primary source of revenue for Comcast (Comcast Corporation, 2018). Additional services by Cable communication include wireless phone services. Cable communication had 28 million and 2.3 million residential and business relationships, respectively, as of December 2018(Comcast Corporation, 2018).
Video services include a subscription to premium networks like Cinemax and access to video on demand (Comcast Corporation, 2018). Voice services over high-speed internet enable subscribers to access and manage account features such as text messaging over mobile apps or online portals (Comcast Corporation, 2018).
NBC Universal Segments
As a leading entertainment and media company, NBC Universal develops, produces, and then distributes news, entertainment, and other media content globally (Comcast Corporation, 2018).
Cable Networks. This segment constitutes a diversified national cable network portfolio providing a range of entertainment, sports, news and information, international cable networks, and operations in the cable television studio (Comcast Corporation, 2018). Besides, the business segment also owns several digital properties. The primary revenue for this segment is the distribution and licensing of programming and form advertising on its networks (Comcast Corporation, 2018).
Broadcast Television. This business segment serves advertisers ad viewers in the US through the operation of Telemundo and NBC (Comcast Corporation, 2018). The primary source of revenue for this segment is an advertising and digital properties, such as licensing of its programming (Comcast Corporation, 2018). NBC network distributes sports programming, news, and entertainment t in the US, whereas Telemundo distributes Spanish-language content internationally (Comcast Corporation, 2018).
Filmed entertainment. This business segment distributes filmed entertainment globally after producing or acquiring from other parties. Also, it generates revenue through the sale of consumer products and distribution of filmed entertainment sourced from third parties (Comcast Corporation, 2018).
Theme parks. This business segment consists of Universal theme parks found in areas such as Hollywood, Florida, and Japan. The theme park segment also licenses the right to use brand names for universal studios as well as other intellectual properties. The primary revenue for this segment is form sales of tickets as well as guest expenditures at the theme parks (Comcast Corporation, 2018).
The Sky business segment is among Europe's leading entertainment companies. It derives the majority of its revenue from direct-to-consumer video services that involve the distribution of a variety of video channels to consumers (Comcast Corporation, 2018). It was approximated to have more than 23.6 million retail customers in 2018(Comcast Corporation, 2018). Sky owns an extensive portfolio of television channels that provide sports and movies, news, and entertainment. Other services by Sky include the provision of high-speed internet, wireless phone services, and voice services in selected countries (Comcast Corporation, 2018).
Factors Facing Comcast
Comcast reported that the business environment for their businesses is intensively competitive, consumer-driven, and dynamic, with the increasing growth of firms providing a wide range of technology and media services to consumers (Comcast Corporation, 2018). Existing business models are being challenged by the increasingly advancing technology, which is complicating and intensifying the competitive landscape (Comcast Corporation, 2018). There is an increasing number of consumers purchasing and viewing content from online sources, which has decreased Comcast video customers and cable network subscribers (Comcast Corporation, 2018). The increasing preference of online content as opposed to cable network content could have a positive impact as it increases the value for Comcast's high-speed internet services to consumers preferring online content(Comcast Corporation, 2018). Competition has also contributed to audience fragmentation from the increasing entertainment alternatives, and this will probably affect Comcast's cable network ratings.
Seasonality and Cyclicality
Comcast has three businesses that are all subject to seasonal to cyclical and seasonal variations (Comcast Corporation, 2018). Comcast Cable Communication business segment is seasonal as residential customers in colleges, and vacation markets are seasonal (Comcast Corporation, 2018). Cyclicality also affects revenues for Comcast as advertising and viewership levels patterns are cyclical. During spring, advertising revenues are high as the number of consumers advertising on the business segment increases. Another factor contributing to cyclicality in the election years which increases advertising for political candidates. Revenues are also cyclical due to periodic sports broadcast like the World Cup, which affects Comcast media segments.
The Filmed Entertainment segment revenue depends on timing, the number of films, and the nature of films released through distribution platforms and movie theatres. As such, revenues are seasonal, and there are increases during summer and holiday months (Comcast Corporation, 2018). In Theme Parks, revenues fluctuate due to factors such as theme attendance, weather variation, and new attraction sites. Comcast theme parks are at peak during spring holiday and summer months (Comcast Corporation, 2018).
The Sky segment revenues are affected by seasonal events such as soccer seasons and Christmas holidays (Comcast Corporation, 2018). Sky's content strategy is impacted by exclusive sports rights such as Formula 1, where broadcasting rights create cyclicality for Sky. Advertising business results for Sky are also affected by cyclical changes in viewership levels and advertising patterns and fluctuate with changes in nature, timing, and quantity of original programming given to other markets (Comcast Corporation, 2018).
Legislation and Regulation
Comcast's businesses are affected by Communication Act and FCC regulations in the United States. The businesses are also impacted by federal, local, and state regulations and agreements with local authorities in cable franchising (Comcast Corporation, 2018). International businesses for Comcast are also impacted by jurisdiction and laws by foreign regulatory authorities (Comcast Corporation, 2018). Regulators and legislators in the government regularly propose changes and sometimes change statues, rules, and regulations in place or prescribe new interpretations, which affects the businesses (Comcast Corporation, 2018). Comcast considers future actions (regulatory, judicial, legislative, or administrative) as a possible threat as they may increase costs or impose restrictions that may harm the business (Comcast Corporation, 2018). A major concern is that future outcome for legislative proposals are almost unpredictable as well as their effects on Comcast businesses.
Notable Financial Analysis for Comcast In 2018
According to the Comcast Annual report (2018), the Cable Communications segment for Comcast experienced a 3.9% increase in revenue due to increases in high-speed internet, advertising revenue, and business services. An upwards shift in operating margin from 39.7% to 40.7% reflected a rise in revenue due to the high-speed internet alongside business services. Further, there was a reduction in capital expenditures of 3%, which implied that there was an increase in investment in both infrastructure and line extensions to increase network capacity and expand business services.
The NBC Universal segment had an 8.9% increase in revenue. Cable Networks had a 12.2% increase in revenue, whereas the Broadcast Television segment had a 19.6% increase in revenue. The Filmed Entertainment business segment had a 5.8% decrease in income, implying that there was reduced home entertainment, and other content licensing revenue. Also, Theme Park segment revenues grew by 4.4%, an indication that there were increased ticket prices and higher spending by guests.
The Comcast Annual Report (2018) also indicated that the Sky Segment, from October to December 2018 recorder $4.6 billion in revenue
Relevant Markets for Comcast
Based on the general analysis of the Comcast and its business segment, it is clear that the relevant markets/industries for Comcast can be classified into the media and entertainment industry, telecommunication, and technology industry. As seen described above, Comcast operates three businesses: NBC Universal, Sky, and Comcast Cable.
Major Changes in the Media and Entertainment, Telecommunication and Technology Industry and Factors Currently Affecting or May Potentially Drive the Changes
Media and Entertainment Industry
The media and entertainment industry has, in the past, experienced digital disruption and continues to experience transformation. With the advancement in technology, the distinction between various form of media and entertainment such as video games, print, and digital, traditional media and social media are blurring, and there is need for companies to re-envision all aspect of their operation and the way they do it (Gershon, 2013). Brands must aim to have access to the right premium content and technology, which must be delivered in cost-effective methods to the targeted audience (Gershon, 2013).
According to Abramovich (2019), five significant changes are occurring in the media and entertainment industry, which will continue to shape the industry. First, there is an increasing change in business segments that generate revenue for the companies in the media and entertainment industry. The three identified fastest-growing revenue segment by 2022 will be internet advertising, over-the-top (OTT) video, and virtual reality (VR) (Abramovich, 2019). The United States is the leading market in this new concept and has $1.5 billion in rev...
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