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 asCable Communications ; (2) NBCUniversal in four reportable business segments: Cable Networks, Broadcast Television,Filmed Entertainment andTheme Parks (collectively, the "NBCUniversal segments"); and (3) Sky in one reportable business segment. Cable Communications SegmentCable 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 ofSeptember 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 theNBC and Telemundo broadcast networks, ourNBC 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 fromNBC -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 theUniversal Pictures , Illumination,DreamWorks Animation andFocus 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 inOrlando, Florida ;Hollywood, California ; andOsaka, Japan . In addition, we are developing a theme park inBeijing, China along with a consortium of Chinese state-owned companies, and an additional theme park inOrlando, Florida . Revenue is generated primarily from guest spending at our Universal theme parks. 17
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Table of Contents Sky Segment Sky is one ofEurope'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, theSky News broadcast network andSky Sports networks. As ofSeptember 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 thePhiladelphia Flyers and theWells Fargo Center arena inPhiladelphia, Pennsylvania , and other business initiatives, such as Peacock, which was made available to Comcast customers inApril 2020 and launched nationally inJuly 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. OurCable Communications results of operations were strong in the nine months endedSeptember 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 inMarch 2020 and continuing through the end ofDecember 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 ofJune 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
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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 endedSeptember 30, 2020 on a consolidated basis. Our parks inOrlando andJapan reopened with limited capacity inJune 2020 , while our park inHollywood 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 theHollywood 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 thatUniversal Beijing Resort will open in 2021, we have delayed certain construction projects, including the development of the Epic Universe theme park inOrlando . •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 2020Tokyo 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 inthe 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 ourFilmed 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 andJune 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 theU.K. andEurope , intensifying what was an already deteriorating economic and advertising environment. These conditions negatively impacted revenue in the nine months endedSeptember 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
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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 ofSeptember 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 endedSeptember 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 theOlympic Games , which affect Cable Networks and Broadcast Television, and theSuper 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 theOlympic 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 inCable Communications , Cable Networks, Broadcast Television and Sky is also subject to cyclical advertising patterns and changes in viewership levels. Advertising revenue in theU.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
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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 theOlympic Games and theFIFA World CupTM. Revenue inFilmed 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 inTheme 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. InEurope , 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
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