Earnings Call: Comcast’s Roberts: Canoe Ventures Revenues Expected By 2010

Comcast (NSDQ: CMCSA) executives continued to highlight the importance of their digital plans during the Q2 earnings call. Deals with Clearwire (NSDQ: CLWR) for the rollout of its 4G service were highlighted as well as its All Digital initiative. Brian Roberts also discussed the progress made on the cable ad targeting company it and the other major MSOs are backing, Canoe Ventures. That project’s plans have been stymied lately, but Roberts told analysts that he expects to see some revenue from Canoe by next year, though it won’t be substantial.

No ad rebound: Despite a positive Q2 in general, Comcast’s advertising revenues continued to take a beating, along with just about everyone else’s. CFO Mike Angelakis: “The overall ad market continues to be challenging. Our local cable ad revenues declined 20 percent this quarter and we are not seeing any signs of recovery. Advertising weakness also impacted our national programming networks. Our programming division reported a 5 percent increase in revenue, however it includes a 7 percent decline in advertising revenue in the second quarter.”

All-digital by end of ’09: COO Steve Burke: In June, Portland, Ore., became the first large system in Comcast’s orbit to abandon analog channels and go All-Digital. Today, 10 percent of the company has made the conversion and one-third of all Comcast’s systems are working on the switch as well and will complete the process by the end of the year.

Clearwire margins: Asked about the Clearwire strategy. The promotional pricing that was unveiled in Portland was pretty aggressive, said Craig Moffett, of Sanford Bernstein, so he asked CEO Brian Roberts about the kinds of margins Comcast expect to make on that business? Roberts: “The Comcast-To-Go product, which is powered by Clearwire’s network, is primarily sold with our high-speed data offerings. We charge $49.95 for the first year. Most of the time we sell high-speed data, we have some sort of promotional price. So we’re getting high-speed data subs that we would have otherwise promoted to and the Comcast-To-Go subs on top of that. At the end of the year, the price resets to $69.95 and the combination products has a healthy margin of 40 percent. I understand you’re point. We’re using someone else’s network and there is a transfer price. But we’re quite comfortable with this arrangement. As it relates to other things we’re doing in wireless, we’d rather not tip our hand. Obviously, the 4G wireless rollout is a big part of that, but it’s not the only part.”

Canoe’s revenue outlook: In June, Canoe Ventures, the cable TV ad targeting company backed by Comcast and the other MSOs, said it was suspending its first addressable TV initiative and would turn its attention to a lead gen product. Bank of America/Merrill Lynch analyst Jessica Reif Cohen asked about the progress there and whether Comcast would have to wait until 2011 to realize any revenues from its investment in the company. Roberts: “We just had a three-hour Canoe board meeting. We’re making progress. We’re not seeing it in the numbers, and you won’t see it in a material fashion for a while. One of the products we’re working on now is the rollout of EBIF (Enhanced Binary Interchange Format, ), which will allow us to do a lot more interactivity, such as voting and polling. Depending on how that rollout goes, the partners could have 25 million EBIF-enabled homes by Q4. Those homes will be Canoe-enabled homes and there’s going to be an entire business built on that…You’ll see some revenue from [the Canoe business] in 2010.”

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