With AT&T and Time Warner proposing to combine to create a company that looks a lot like Comcast, NBCUniversal CEO Stephen Burke warns that the new company’s goal to build advanced advertising capabilities won’t be easy.
During Comcast’s earnings call with analysts Wednesday morning, Comcast CEO Brian Roberts said his executives would decline to comment on the AT&T-Time Warner transaction.
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But in answering questions, they said that advanced advertising was hard, that they were skeptical of virtual and over-the-top multichannel video programming distributors, and that declining NFL ratings aren’t causing too much concern.
“Advanced advertising has been around. People have been talking about it for a long time. It’s not easy. It’s hard to develop these products,” Burke said in response to a question.
“But it’s clear what advertisers want. They want to combine the data intensity of internet advertising with the clear value and ability to change people’s perceptions that you get with a television ad. So it’s a pretty important part of Neil and I’s agenda, and I think we’re at the head of the pack in terms of delivering on it, but there’s still work to do,” Burke said.
“At NBCUniversal we have a handful of advanced advertising products that are currently in the market,” Burke said. “And we have about 100 advertisers that have bought these products. The most prominent one right now is called NBCU Plus Powered by Comcast, and it’s a way of overlaying Comcast capabilities with the base national buy.”
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Neil Smit, CEO of Comcast Cable, said Comcast has fully rolled out VOD and dynamic ad insertion, which he added is becoming more and more effective.
Comcast is also testing linear addressable advertising in a number of markets, and it’s working.
He noted that Comcast gets data from 20 million set-top boxes and has acquired ad tech companies including FreeWheel, Visible World, Strata and StickyAds.
“We think we’re making great progress, and it’s a growth business for us,” Smit said.
Burke also expressed some skepticism about how big the virtual MVPD business will become at a time when AT&T is talking about rolling out its DirecTV product at a price point of $35 a month.
"There about 20 million homes in America that are not part of the cable-satellite-telco MVPD environment. And the real promise of some of these over-the-top entrants is that they would deliver incremental subscribers, which obviously would be good for the content side of the company,” Burke said.
“I think we all have a healthy degree of skepticism that these new over-the-top entrants are going to create millions and millions of subscribers any time soon,” he added.
“I think if you look at the cable ecosystem, I’ve now been with Comcast 18 years, and for 18 years Comcast earnings have been up every single quarter. And yes, as new entrants come in they take fractional share away from the existing suppliers. But the fact of the matter is most people find tremendous value and enjoyment in their cable or satellite subscription and are not looking to change,” Burke said.
“And there are all sorts of issues that over the top providers are going to have to deal with including cost and service and everything else. So I think there could be a modest positive for NBCUniversal. I don’t expect it to be material in the next year or two, but over time, if some of those 20 million non-subscribers become subscribers, it would be positive,” he added.
Smit noted that Comcast has improved subscriber retention for 32 consecutive months and that the company is creating products that target market niches, such as college students.
“I think there’s going to be more flavors and more competition, but we’ll compete aggressively,” Smit said.
Burke was also asked about lower ratings for the Olympics and the NFL. He said only a tiny portion of viewing for those live sports events was moving online.
"The NFL had an extraordinary season last year, which everybody’s comparing to. We’re actually down versus last year, but down much less versus two years ago."
It’s very difficult to tell precisely what’s happening on any sporting property, particularly in the case of the NFL because it’s only been a half dozen weeks.
“I do think there are a lot of different things that people are consuming on the internet and spending their time on. I also think there are seasons that are stronger than other seasons, and we may be in a season, just speaking for Sunday Night Football, where the matchups aren’t as good as they could have been,” Burke said.
“But if you step back, the Olympics and the NFL are the two highest-rated programs of the year in all of television. They dominate the nights they’re on,” he added. “Sunday Night Football is by far the highest rated show on television and we have very good partnerships with the International Olympic Committee and the NFL that go out many years, and those are very profitable relationships.”
Burke said NBCU was watching the NFL’s performance. “We’re watching it and obviously you’d rather have ratings up than down, but having ratings decline modestly and still being very strong properties doesn’t cause us too much concern,” he said.
