Overview


We are a global media and technology company with three primary businesses:
Comcast Cable, NBCUniversal, and Sky. We present our operations for (1) Comcast
Cable in one reportable business segment, referred to as Cable Communications;
(2) NBCUniversal in four reportable business segments: Cable Networks, Broadcast
Television, Filmed Entertainment and Theme Parks (collectively, the
"NBCUniversal segments"); and (3) Sky in one reportable business segment.
Cable Communications Segment
Cable Communications is a leading provider of high-speed internet, video, voice,
wireless, and security and automation services to residential customers under
the Xfinity brand; we also provide these and other services to business
customers and sell advertising. As of September 30, 2020, our cable systems had
32.7 million total customer relationships, including 30.3 million residential
and 2.4 million business customer relationships, and passed more than 59 million
homes and businesses. Revenue is generated primarily from residential and
business customers that subscribe to our services, which are marketed
individually and as bundled services, and from the sale of advertising.
NBCUniversal Segments
NBCUniversal is one of the world's leading media and entertainment companies
that develops, produces and distributes entertainment, news and information,
sports, and other content for global audiences, and owns and operates theme
parks worldwide.
Cable Networks
Cable Networks consists primarily of our national cable networks that provide a
variety of entertainment, news and information, and sports content; our regional
sports and news networks; our international cable networks; our cable television
studio production operations; and various digital properties. Revenue is
generated primarily from the distribution of our cable network programming to
traditional and virtual multichannel video providers; from the sale of
advertising on our cable networks and digital properties; from the licensing of
our owned programming, including programming from our cable television studio
production operations, to cable and broadcast networks and subscription video on
demand services; and from the sale of our owned content on standard-definition
DVDs and Blu-ray discs (together, "DVDs") and through digital distribution
services such as iTunes.
Broadcast Television
Broadcast Television consists primarily of the NBC and Telemundo broadcast
networks, our NBC and Telemundo owned local broadcast television stations, the
NBC Universo national cable network, our broadcast television studio production
operations, and various digital properties. Revenue is generated primarily from
the sale of advertising on our networks and digital properties, from the
licensing of programming, including to cable and broadcast networks as well as
to subscription video on demand services; from the fees received under
retransmission consent agreements and associated fees received from
NBC-affiliated and Telemundo-affiliated local broadcast television stations; and
from the sale of our owned programming on DVDs and through digital distribution
services.
Filmed Entertainment
Filmed Entertainment primarily produces, acquires, markets and distributes
filmed entertainment worldwide. Our films are produced primarily under the
Universal Pictures, Illumination, DreamWorks Animation and Focus Features names.
Revenue is generated primarily from the worldwide distribution of our produced
and acquired films for exhibition in movie theaters, from the licensing of
produced and acquired films through various distribution platforms, and from the
sale of produced and acquired films on DVDs and through digital distribution
services. Filmed Entertainment also generates revenue from Fandango, a movie
ticketing and entertainment business, consumer products, the production and
licensing of live stage plays, and the distribution of filmed entertainment
produced by third parties.
Theme Parks
Theme Parks consists primarily of our Universal theme parks in Orlando, Florida;
Hollywood, California; and Osaka, Japan. In addition, we are developing a theme
park in Beijing, China along with a consortium of Chinese state-owned companies,
and an additional theme park in Orlando, Florida. Revenue is generated primarily
from guest spending at our Universal theme parks.
                                       17

--------------------------------------------------------------------------------


  Table of Contents
Sky Segment
Sky is one of Europe's leading entertainment companies, which primarily includes
a direct-to-consumer business, providing video, high-speed internet, voice and
wireless phone services, and a content business, operating entertainment
networks, the Sky News broadcast network and Sky Sports networks. As of
September 30, 2020, Sky had 23.7 million retail customer relationships.
Corporate and Other
Our other business interests consist primarily of the operations of Comcast
Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena
in Philadelphia, Pennsylvania, and other business initiatives, such as Peacock,
which was made available to Comcast customers in April 2020 and launched
nationally in July 2020.
Impacts of COVID-19
The novel coronavirus disease 2019 ("COVID-19") and measures taken to prevent
its spread across the globe continue to impact our businesses in a number of
ways. Our Cable Communications results of operations were strong in the nine
months ended September 30, 2020, despite having been affected by the significant
deterioration in domestic economic conditions and by the costs associated with
our support of customer connectivity as people continued to work and learn
remotely from home. COVID-19 had material negative impacts on NBCUniversal and
Sky results of operations during the second and third quarters of 2020 primarily
due to the temporary closure of our theme parks and the postponement and
cancellation of many sporting events. We continue to implement and evaluate cost
initiatives across our businesses that have impacted and will continue to impact
our results of operations; certain costs incurred by our businesses in response
to COVID-19, including severance and restructuring charges, are presented in
Corporate and Other. We expect the impacts of COVID-19 will continue to have a
material adverse impact on our consolidated results of operations over the near
to medium term.
Cable Communications
•Our distribution network to date has performed well under the stress of
increased traffic and peak usage driven by increased video streaming, gaming and
videoconferencing as more customers work and learn remotely from home.
•We incurred costs in 2020 associated with compensating personnel in roles
affected by COVID-19, primarily during the first half of the year. These costs
included additional compensation for frontline personnel who worked to keep our
customers connected to our services and compensation for certain personnel who
were unable to work due to the closing or suspension of operations.
•Beginning in March 2020 and continuing through the end of December 2020, new
qualifying customers for Internet Essentials, our low-income internet adoption
program, will receive 60 days of free internet services. We also implemented
programs, primarily during the second quarter of 2020, under which we elected to
waive certain fees and to not disconnect internet, voice or wireless services
for customers for nonpayment, and we are now providing customers a variety of
flexible and extended payment options. As a result of these programs, our
customer metrics for 2020 do not include customers in the free Internet
Essentials offer or certain high-risk customers who continued to receive service
following nonpayment. The number of customers excluded from our customer metrics
was highest as of June 30, 2020 and these customers were excluded from second
quarter net additions. The number of such customers decreased in the third
quarter as some of these customers began paying for service, resulting in
customer net additions, or disconnected and no longer receive service. We expect
the number of excluded customers to continue to decrease in the fourth quarter.
•Professional sports leagues have generally resumed, some with a reduced
schedule for the remainder of the interrupted seasons. Certain of our
programming distribution agreements with regional sports networks include
contractual adjustment provisions if a minimum number of sporting events does
not occur. In the second and third quarters of 2020, our programming expenses
were reduced as a result of these provisions, and our revenue was negatively
impacted in similar amounts as a result of adjustments that we have begun
passing through to our customers in the fourth quarter of 2020.
•The deterioration of economic conditions and increased economic uncertainty
resulting from COVID-19 have resulted in reduced demand for certain of our
residential and business services and reduced spending from advertisers, which
have had, and likely will continue to have, negative impacts on our revenue over
the near to medium term. In addition, we believe there is increased risk
associated with collections on our outstanding receivables, and we have
incurred, and expect to continue to incur, increases in our bad debt expense
compared to the prior year periods.
                                       18

--------------------------------------------------------------------------------


  Table of Contents
NBCUniversal
•The temporary closure of all of our theme parks had the most significant impact
on our revenue and Adjusted EBITDA for the nine months ended September 30, 2020
on a consolidated basis. Our parks in Orlando and Japan reopened with limited
capacity in June 2020, while our park in Hollywood remains closed. We expect the
results of operations at our theme parks will continue to be negatively impacted
in the near to medium term, and we cannot predict when the Hollywood park will
reopen, if any reopened parks will remain open or the level of attendance at any
reopened parks. In addition, although we currently expect that Universal Beijing
Resort will open in 2021, we have delayed certain construction projects,
including the development of the Epic Universe theme park in Orlando.
•The deterioration of economic conditions caused by COVID-19 resulted in
significant reductions in advertising spend by our customers in the Cable
Networks and Broadcast Television segments in the second and third quarters of
2020, and we expect this trend to continue over the near to medium term. These
conditions have also resulted, and may continue to result, in an acceleration of
subscriber losses at our networks.
•We incurred costs in 2020 associated with compensating personnel who were
unable to work due to the closing or suspension of operations, primarily during
the first half of the year, including at our theme parks and at our production
studios.
•The postponement and cancellation of many sporting events and professional
sports seasons impacted our first and second quarter 2020 results of operations,
since both advertising revenues and costs associated with broadcasting these
programs were not recognized. Professional sports leagues have generally resumed
in the third quarter of 2020, some with reduced numbers of events for the
remainder of the interrupted seasons. Certain of our sports programming rights
agreements and distribution agreements with multichannel video providers include
contractual provisions if a minimum number of events does not occur. Our
distribution revenue in the second and third quarters of 2020 was negatively
impacted as a result of credits accrued relating to these provisions; and the
programming costs that we recognize as the remaining events occur, which were
primarily in the third quarter of 2020, will also be impacted. When, or the
extent to which, sporting events will occur for the remainder of 2020 and into
2021 will impact the timing, and potentially the amount, of revenue and expense
recognition. In addition, the 2020 Tokyo Olympics have been postponed from the
third quarter of 2020 to the third quarter of 2021, which will result in a
corresponding delay of the associated revenue and costs.
•The creation and availability of our film and television programming in the
United States and globally have been disrupted, including from the suspension of
studio production operations in the first half of 2020. In the third quarter of
2020, our studio production operations resumed at a limited capacity.
Additionally, with the temporary closure of many movie theaters worldwide, we
have delayed or altered the theatrical distribution strategy for certain of our
films, both domestically and internationally. Delays in theatrical releases will
affect both current and future periods as a result of corresponding delays in
subsequent content licensing windows. We expect results of operations in our
Filmed Entertainment segment to continue to be negatively impacted over the near
to medium term as a result of COVID-19.
Sky
•Many sporting events and professional sports seasons were postponed beginning
in the second half of the first quarter of 2020, with certain sports, including
European soccer, resuming in May and June 2020, which resulted in significant
impacts on Sky's results of operations in the first, second and third quarters
of 2020. Direct-to-consumer revenue has been negatively impacted as a result of
lower sports subscription revenue and we expect continued negative impacts as a
result of the impacts of COVID-19 on the reopening plans and the extent of
reopening of our commercial customers. Additionally, significant costs
associated with broadcasting these programs were not recognized as a result of
the sporting events not occurring in the first quarter and for most of the
second quarter. These costs were generally recognized in the third quarter of
2020; and although sporting events have resumed, COVID-19 continues to result in
uncertainty in the ultimate timing of when, or the extent to which, sporting
events will occur for the remainder of 2020; their broadcast is expected to
impact the timing, and potentially the amount, of revenue and expense
recognition.
•We temporarily suspended certain sales channels due to COVID-19, which
negatively impacted net customer additions and revenue in the first and second
quarters of 2020. Our sales channels generally resumed operations in June.
•COVID-19 has resulted in the deterioration of economic conditions and increased
economic uncertainty in the U.K. and Europe, intensifying what was an already
deteriorating economic and advertising environment. These conditions negatively
impacted revenue in the nine months ended September 30, 2020, and we expect will
continue to reduce advertising spend and consumer demand for our services for
the remainder of 2020. In addition, there is increased risk associated with
collections on our outstanding receivables, and we have incurred and expect to
continue to incur increases in our bad debt expense.
                                       19

--------------------------------------------------------------------------------


  Table of Contents
Global financial markets have been volatile and domestic and global economic
conditions continue to show signs of material weakness. At this point, it is
impossible to predict the extent and duration of these and any other impacts of
COVID-19 to our businesses, or the degree to which demand for our products and
services, or supply of key inputs to those products and services, will be
affected. This uncertainty makes it challenging for management to estimate with
precision the future performance of our businesses.
As of September 30, 2020, we evaluated whether the facts and circumstances and
available information resulted in the need for an impairment assessment for any
of our long-lived assets and concluded no assessment was required. Refer to the
Critical Accounting Judgments and Estimates section for discussion of our
impairment testing of goodwill and cable franchise rights. We will continue to
evaluate the impacts of COVID-19 to our businesses, including the impacts of
overall economic conditions, which could result in the recognition of an
impairment charge in the future. Our results for the nine months ended September
30, 2020 were impacted by significant losses and gains as a result of the
volatility in the market values for publicly traded equity securities underlying
our investments.
Liquidity
Although negatively impacted by the effects of COVID-19, we expect that our
businesses will continue to generate significant cash flow from operating
activities and we believe that these cash flows, together with our existing
cash, cash equivalents and investments, available borrowings under our existing
credit facilities, and our ability to obtain future external financing, will be
sufficient for us to meet our current and long-term liquidity and capital
requirements. However, we expect the timing of certain priorities to be
impacted, such as the pace of our debt reduction efforts and return to share
repurchases, and the delay of certain capital projects.
Competition
All of our businesses operate in intensely competitive, consumer-driven and
rapidly changing environments and compete with a growing number of companies
that provide a broad range of communications products and services, and
entertainment, news and information content to consumers. Technological changes
are further intensifying and complicating the competitive landscape and
challenging existing business models. In particular, consumers are increasingly
turning to online sources for viewing and purchasing content, which has and
likely will continue to reduce the number of our video customers and subscribers
to our cable networks even as it makes our high-speed internet services more
valuable to consumers. In addition, the increasing number of entertainment
choices available to consumers has intensified audience fragmentation and
disaggregated the way that content traditionally has been viewed by consumers.
This increase has caused and likely will continue to cause audience ratings
declines at our programming channels.
For additional information on the competition our businesses face, see our 2019
Annual Report on Form 10-K and refer to Item 1: Business and Item 1A: Risk
Factors. Within the Business section, refer to the "Competition" discussion, and
within the Risk Factors section, refer to the risk factors entitled "Our
businesses operate in highly competitive and dynamic industries, and our
businesses and results of operations could be adversely affected if we do not
compete effectively" and "Changes in consumer behavior driven by online video
distribution platforms for viewing content continue to adversely affect our
businesses and challenge existing business models."
Seasonality and Cyclicality
Each of our businesses is typically subject to seasonal and cyclical variations.
Cable Communications' results are impacted by the seasonal nature of residential
customers receiving our services in college and vacation markets. This generally
results in fewer net customer relationship additions in the second quarter of
each year.
Revenue and operating costs and expenses (comprised of total costs and expenses,
excluding depreciation and amortization expense and other operating gains) are
cyclical as a result of our periodic broadcasts of major sporting events, such
as the Olympic Games, which affect Cable Networks and Broadcast Television, and
the Super Bowl, which affects Broadcast Television. In particular, advertising
revenue increases due to increased demand for advertising time for these events
and distribution revenue increases in the period of broadcasts of the Olympic
Games. Operating costs and expenses also increase as a result of our production
costs for these broadcasts and the amortization of the related rights fees.
Revenue in Cable Communications, Cable Networks, Broadcast Television and Sky is
also subject to cyclical advertising patterns and changes in viewership levels.
Advertising revenue in the U.S. is generally higher in the second and fourth
quarters of each year and in even-numbered years due to increases in consumer
advertising in the spring and in the period leading up to and including the
holiday season and advertising related to candidates running for political
office and issue-oriented advertising, respectively. Revenue in Cable Networks
and Broadcast Television fluctuates depending on the timing of when our
programming is aired, which typically results in higher advertising revenue in
the second and fourth quarters of each year.
                                       20

--------------------------------------------------------------------------------


  Table of Contents
Revenue at Sky has seasonally higher audience levels in winter months and
increased competition during major sporting events where public service
broadcasters lease the rights, such as the Olympic Games and the FIFA World
CupTM.
Revenue in Filmed Entertainment fluctuates due to the timing, nature and number
of films released in movie theaters, on DVDs, and through various other
distribution platforms. Release dates are determined by several factors,
including competition and the timing of vacation and holiday periods. As a
result, revenue tends to be seasonal, with increases experienced each year
during the summer months and around the holiday season. Content licensing
revenue in our Cable Networks, Broadcast Television and Filmed Entertainment
segments also fluctuates due to the timing of when our content is made available
to licensees.
Revenue in Theme Parks fluctuates with changes in theme park attendance that
result from the seasonal nature of vacation travel and weather variations, local
entertainment offerings and the opening of new attractions, as well as with
changes in currency exchange rates. Theme Parks generally experiences peak
attendance during the spring holiday period, the summer months when schools are
closed and the Christmas holiday season.
Sky's results are impacted by the seasonal nature of residential customers
receiving direct-to-home ("DTH") and over the top ("OTT") video services,
including the start of the new soccer seasons and the Christmas holiday. This
generally results in greater net customer relationship additions and higher
subscriber acquisition costs in the second half of each year due to higher
marketing expenses.
Exclusive sports rights play a key role within Sky's wider content strategy. In
Europe, broadcasting rights for major sports are usually tendered through a
competitive auction process, with the winning bidder or bidders acquiring rights
over a three to five-year period. This creates some level of cyclicality for
Sky, although the staggered timing of major sports rights auctions usually gives
Sky time to react to any material changes in the competitive dynamics of the
prevailing market. Certain of Sky's significant sports rights agreements require
payments at the start of each season, resulting in increases in sports rights
payments in the third and fourth quarter of each year.
                                       21

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses