Post-Sky Deal, Some See Comcast's Future Heading Toward Streaming

With Sky under Comcast's belt, analysts see the obvious next big step a major leap into over-the-top offerings. NBCUniversal CEO Stephen Burke, in an earnings call Thursday, said while the world pivots toward more streaming, the company wants to "protect and nurture" its pay-TV business. He said industry has rushed into streaming, but economics are challenging.

Kagan wrote that Comcast/Sky purchase and AT&T/DirecTV are partly about picking up customer bases that can be used to springboard into what likely will be international streaming products. Kagan told investors Comcast and AT&T will go into streaming with assets streaming companies didn't have initially, like big marketing budgets and desirable movie and linear TV libraries. Kagan said Comcast's programming assets point to virtual MVPD making more sense although a VOD component is also likely. It said New Comcast's Sky programming, its Universal library and its content rights could easily create a significant streaming rival to what AT&T and Disney are likely to do, with the aim potentially of driving traffic to broadband-only packages.

Noting weakening growth in the OTT universe, MoffettNathanson's Craig Moffett wrote investors if OTT "is simply not quite the runaway freight train that some might have thought," that could be a challenge for NBCU's hopes for a "digital distribution safety net." Subscriber trends for direct broadcast satellite mean "Sky's long term future HAS to be as an OTT distributor," he said.

Comcast "paid an undeniably rich price" for Sky, getting a strong brand and valuable cable networks for pushing into additional European countries, Pivotal Research's Jeffrey Wlodarczak emailed investors. New Comcast has the scale and underpinning needed if it wants to do global OTT launches, he said.

Asked about Sky's price tag in the earnings call, Comcast CEO Brian Roberts said it previously had been "mispriced," perhaps because of regulatory uncertainty. Sky CEO Jeremy Darroch said Sky's strengths include its ability to acquire exclusive content in Europe and being less bundle driven. He said the top priority under New Comcast is to grow the pay-TV business with assets in place, such as a recently launched Sky service that doesn't require a satellite dish as a route to customers who can't have or don't want one. Darroch said Sky will invest more in original content while it cuts investment in niche linear channels and second-tier sports. Roberts said Comcast's X1 video platform, which incorporates Netflix and YouTube, will add Amazon Prime Video next.

For the quarter, Comcast said revenue was up 5 percent year over year to $22.1 billion. The company ended the quarter with 24.8 million residential broadband customers, up 182,000; 21 million residential video customers, down 134,000; and 10.2 million residential voice customers, down 119,000. Xfinity Mobile had more than 1 million customer lines, including 228,000 net additions. Shares closed up 5 percent Thursday to $35.84.