Comcast 2008 Annual Report Download - page 24

Item 7: Management’s Discussion and
Analysis of Financial Condition and Results
of Operations
Introduction and Overview
We are the nation’s leading provider of cable services, offering
a variety of entertainment, information and communications
services to residential and commercial customers. As of
December 31, 2008, our cable systems served approximately
24.2 million video customers, 14.9 million high-speed Internet
customers and 6.5 million phone customers and passed over
50.6 million homes in 39 states and the District of Columbia. We
report the results of these operations as our Cable segment, which
generates approximately 95% of our consolidated revenue. Our
Cable segment also includes the operations of our regional sports
networks. Our other reportable segment, Programming, consists
primarily of our national programming networks. During 2008, our
operations generated consolidated revenue of approximately
$34.3 billion.
Our Cable segment generates revenue primarily through sub-
scriptions to our video, high-speed Internet and phone services
(“cable services”). We market our cable services individually and in
packages, to residential customers and to small and medium-
sized businesses. Our video services range from a limited analog
service to a full digital service with access to hundreds of channels,
including premium and pay-per-view channels; On Demand; music
channels; and an interactive, on-screen program guide. Digital
video customers may also subscribe to advanced digital video
services, including digital video recorder (“DVR”) and high-
definition television (“HDTV”). As of December 31, 2008,
approximately 48% of the homes in the areas we serve subscribed
to our video service and approximately 70% of those video
customers subscribed to at least one of our digital video services.
Our high-speed Internet services provide Internet access at down-
stream speeds of up to 24 Mbps, depending on the service
selected, and up to 50 Mbps with the introduction of DOCSIS 3.0
technology, also referred to as Wideband, based on geographic
market availability. As of December 31, 2008, approximately 30%
of the homes in the areas we serve subscribed to our high-speed
Internet services. Our digital phone services provide local and
long-distance calling and other features. As of December 31,
2008, approximately 14% of the homes in the areas we serve
subscribed to our digital phone services. In addition to cable serv-
ices, other Cable segment revenue sources include advertising
and the operation of our regional sports networks.
Our Programming segment consists primarily of our consolidated
national programming networks, including E!, Golf Channel,
VERSUS, G4 and Style. Revenue from our Programming segment
is generated primarily from the sale of advertising, from monthly
per subscriber license fees paid by multichannel video providers
and from licensing our programming internationally.
Our other business interests include Comcast Interactive Media
and Comcast Spectacor. Comcast Interactive Media develops and
operates Comcast’s Internet businesses, including Comcast.net,
Fancast, thePlatform, Fandango, Plaxo and DailyCandy. Revenue
from Comcast Interactive Media is generated primarily from the
sale of advertising. Comcast Spectacor owns two professional
sports teams, and two large, multipurpose arenas in Philadelphia,
and manages other facilities for sporting events, concerts and
other events. Comcast Interactive Media, Comcast Spectacor and
all other consolidated businesses not included in our Cable or
Programming segments are included in “Corporate and Other”
activities.
We operate our businesses in an intensely competitive environ-
ment. Competition for the cable services we offer consists
primarily of direct broadcast satellite (“DBS”) operators and phone
companies. In 2008, our competitors continued to add features
and adopt aggressive pricing and packaging for services that are
comparable to the services we offer and the local phone compa-
nies have continued to expand their service areas. A substantial
portion of our revenue comes from residential customers whose
spending patterns may be affected by prevailing economic con-
ditions. Intensifying competition and a weakening economy
affected our net customer additions in 2008 and may, if these
conditions continue, adversely impact our results of operations in
the future.
2008 Developments
• growth in consolidated revenue of 10.9% to approximately
$34.3 billion and an increase in consolidated operating income
of 20.7% to approximately $6.7 billion
• growth in Cable segment revenue of 10.7% to approximately
$32.4 billion and an increase in operating income before
depreciation and amortization of 10.5% to approximately $13.2
billion
• the addition of approximately 1.5 million digital video customers,
approximately 1.3 million high-speed Internet customers,
approximately 2.0 million digital phone customers and a
decrease of approximately 575,000 video customers (excluding
in each case customers obtained through acquisitions)
• a reduction in Cable segment capital expenditures of 7.5% to
approximately $5.5 billion
• the transition of more of our programming to digital transmission
rather than analog transmission in order to recapture bandwidth
that will allow us to expand our service offerings
Comcast 2008 Annual Report on Form 10-K 22