Vincent Shen: Alright, Dan.
As someone who closely follows the industry month after month, I'm sure you have your
favorites when it comes to the different players in this business.
For the traditional pay TV side of the business, who do you think is best in class?
Dan Kline: I think Comcast is best in class.
You have to look at, they're managing their subscription loss in the U.S. well.
The Sky deal in Europe gives them an almost identical business, but Europe has not had the cord cutting.
It may come, but when it comes, Comcast knows how to manage it.
The second piece of this, which Charter doesn't have, is Comcast owns this huge array of content.
They own Universal Pictures and all the related stuff from that.
What they can do is, as things move to other formats -- let's say they have to make an
NBC streaming service. Well, they can back that up with all their properties, their movies.
They may not quite be Disney, but they still have a nice array of stuff.
They're very well positioned to have things consumers want to see, and they can pivot
to whatever format it is consumers want to see it in.
That could mean licensing to someone else or creating their own thing.
Shen: I'll just add, for example, Comcast's third quarter report, revenue was up 5%,
net income up just under 10%.
We mentioned this a little bit earlier in the show, but even though video subscribers
declined 1.7% during the period, their broadband subscribers were up over 5%.
Again, these are both huge segments, over 20 million people signed up for each.
I think the really notable catalyst, which you briefly mentioned for Comcast right now,
is this Sky takeover. Sky is based in London, the biggest pay TV company in Europe.
Now, it's under Comcast's control.
It almost doubles Comcast's total customer base, and it takes Comcast out of the U.S.
Kline: Which is a big change for a company that was very regional for a very long time.
Shen: Exactly. The deal was very expensive.
A lot of the coverage around this is the fact that the deal cost Comcast $39 billion in
this bidding war against Disney -- another bidding war, because before, they were both going after Fox.
Comcast also ponied up another $15 billion for Disney and Fox's stake of Sky.
This basically solidified their position. They're the controlling shareholder now. They have Sky.
Just to put into perspective how much they paid, there was a 60% premium for what Comcast
paid to what Fox paid originally for its investment in Sky just a few years ago.
A huge jump in that time.
It's ultimately a really nice windfall for the combined Disney-Fox entity, because it's
$15 billion of cash to bolster their coffers.
Kline: If you're Comcast, though, yes, you're taking on a lot of debt, but you're buying an annuity.
Even if you start to see, a year from now, a similar trend to the U.S. of cord cutting,
that's almost irrelevant. I don't know what the exact cash flow of this is.
They haven't reported as a combined company yet.
But they're going to make money on these 19 or 20 million subscribers.
Even if that declines by 1-2% every year for 10 years, it's going to pay off, they're going
to come out well of the game.
It's really a question of, yeah, they paid more, but does that change their earn out
to four years down the line from three?
It's really somewhat irrelevant as long as you believe -- and I do -- that this customer
base isn't going anywhere anytime soon.
Shen: I do agree. I think the deal makes sense.
Sky has encountered some issues that these American companies have, in terms of the European market.
Satellite business there is also declining, for example, I think Comcast will have to
execute well, though, make sure that with everything being integrated, they do it very
smoothly to justify the very large amount of money that they spent to take control of this business.