Comcast 3rd Quarter 2018

[zg44]

Theme parks posted worst numbers (an overall decline) in a decade from the weather disruptions (typhoons, heat waves, earthquakes, etc.) that affected Japan/USJ:

"Theme Parks revenue decreased 1.4% to $1.5 billion in the third quarter of 2018, reflecting an unfavorable impact on attendance as a result of severe weather and natural disasters in Japan. Adjusted EBITDA decreased 6.5% to $725 million in the third quarter of 2018, reflecting lower revenue and an increase in operating expenses."


Unpacking this: I'd assume Orlando/Hollywood experienced some growth (around 2-3% that was heavily outweighed by the decline in Japan: probably down 5%).


The good news in the overall earnings was the strength of Comcast cable broadband continues (up 9.6% with reduced costs, which has been easily outweighing the problems of lost video subscribers, down 2.9%).

NBCUniversal's other 3 divisions (Cable Networks, Broadcast Television, Filmed Entertainment) all posted good growth numbers.

 

[shiekra38]

Theme parks posted worst numbers (an overall decline) in a decade from the weather disruptions (typhoons, heat waves, earthquakes, etc.) that affected Japan/USJ:

"Theme Parks revenue decreased 1.4% to $1.5 billion in the third quarter of 2018, reflecting an unfavorable impact on attendance as a result of severe weather and natural disasters in Japan. Adjusted EBITDA decreased 6.5% to $725 million in the third quarter of 2018, reflecting lower revenue and an increase in operating expenses."


Unpacking this: I'd assume Orlando/Hollywood experienced some growth (around 2-3% that was heavily outweighed by the decline in Japan: probably down 5%).


The good news in the overall earnings was the strength of Comcast cable broadband continues (up 9.6% with reduced costs, which has been easily outweighing the problems of lost video subscribers, down 2.9%).

NBCUniversal's other 3 divisions (Cable Networks, Broadcast Television, Filmed Entertainment) all posted good growth numbers.

How much does USJ dropping a bit affect the rest of the parks?

 

[Mad Dog]

How much does USJ dropping a bit affect the rest of the parks?

I doubt that you can isolate that cost with the public info they give out. USJ has high attendance, but that's still considerably less than the total attendance for Hollywood, USF, IOA & VB. Plus Orlando has a ton of hotel revenue. ....and Singapore doesn't count since Universal doesn't own it...... Bottom line, even without USJ weather related issues, it would have basically been a fairly flat quarter for theme parks.

 

[zg44]

How much does USJ dropping a bit affect the rest of the parks?

I doubt that you can isolate that cost with the public info they give out. USJ has high attendance, but that's still considerably less than the total attendance for Hollywood, USF, IOA & VB. Plus Orlando has a ton of hotel revenue. ....and Singapore doesn't count since Universal doesn't own it...... Bottom line, even without USJ weather related issues, it would have basically been a fairly flat quarter for theme parks.

Back in 2016 when USJ was first acquired, Comcast did indicate that it produced around 28% of the revenue of Universal parks (when they gave their pro-forma measures).

Basically, here's how I'd measure it:

Let's assume that UOR/Hollywood have grown a bit faster due to Harry Potter in Hollywood and new hotel rooms in UOR boosting attendance there: USJ should be around 27% of revenue in 2Q but fell heavily in 3Q (total parks revenue was $1.55 billion in 2Q and $1.528 billion in 3Q)at the moment.


USJ's revenue probably declined at least 15% from $418.5 million to $355.73 million. (A 15% decline is a huge negative for a theme park quarter-over-quarter, but USJ was closed for 2 days from a Typhoon and there were refunded tickets and trips cancelled for a week or so around that event, and there was also a massive heat wave and earthquakes that also caused people to avoid the park; that would cause a drastic decline in quarter-over-quarter revenue). Think about a 15% decline being the equivalent of losing an entire 2 weeks (14 days) worth of revenue out of a 90 day quarter...


The reason I'd expect the loss at USJ to be that large is because Universal Parks EBITDA decreased by $50 million from 2Q to 3Q; that means that functionally USJ probably actually lost money in 3Q... since the park was still operating at costs as if it was expecting the same attendance in 2Q.


So that means UOR+USH (along with licensing fees etc) went from $1.132 billion to $1.172 billion (or an increase of $40 million or 3.2%) if the decrease in Japan was as heavy as I'd expect.

Worth noting that attendance wise, UOR+USH were probably relatively flat from Q2 to Q3 but that 3.2% boost is mostly coming from higher prices.


Overall, there's no real impact, Universal's parks are run with a much tighter cost structure than Disney's, so a dramatic one quarter decline isn't going to harm the overall finances at all. I'd expect a quick snapback in the 4th quarter.

 

[Mad Dog]

Back in 2016 when USJ was first acquired, Comcast did indicate that it produced around 28% of the revenue of Universal parks (when they gave their pro-forma measures).

Basically, here's how I'd measure it:

Let's assume that UOR/Hollywood have grown a bit faster due to Harry Potter in Hollywood and new hotel rooms in UOR boosting attendance there: USJ should be around 27% of revenue in 2Q but fell heavily in 3Q (total parks revenue was $1.55 billion in 2Q and $1.528 billion in 3Q)at the moment.


USJ's revenue probably declined at least 15% from $418.5 million to $355.73 million. (A 15% decline is a huge negative for a theme park quarter-over-quarter, but USJ was closed for 2 days from a Typhoon and there were refunded tickets and trips cancelled for a week or so around that event, and there was also a massive heat wave and earthquakes that also caused people to avoid the park; that would cause a drastic decline in quarter-over-quarter revenue). Think about a 15% decline being the equivalent of losing an entire 2 weeks (14 days) worth of revenue out of a 90 day quarter...


The reason I'd expect the loss at USJ to be that large is because Universal Parks EBITDA decreased by $50 million from 2Q to 3Q; that means that functionally USJ probably actually lost money in 3Q... since the park was still operating at costs as if it was expecting the same attendance in 2Q.


So that means UOR+USH (along with licensing fees etc) went from $1.132 billion to $1.172 billion (or an increase of $40 million or 3.2%) if the decrease in Japan was as heavy as I'd expect.

Worth noting that attendance wise, UOR+USH were probably relatively flat from Q2 to Q3 but that 3.2% boost is mostly coming from higher prices.


Overall, there's no real impact, Universal's parks are run with a much tighter cost structure than Disney's, so a dramatic one quarter decline isn't going to harm the overall finances at all. I'd expect a quick snapback in the 4th quarter.

Yeah, those are probably good guesses fairly close to actuals,which translate into flat attendance with a small increase of revenue due to price increases as you said. Certainly not what Universal has been used to for a quarter's financials, even with the Japan issues discounted. WDW was experiencing issues that quarter also, which may have adversely affected Universal Orlando since Universal feeds off of WDW to a degree. All in all, not a good quarter, as many of us were predicting the past few months....October seems to be doing a bit better with a really strong HHN this year. But daily non HHN portion park crowds seem to be pretty similar to Oct. 2017, not significantly down or up. November & December will be interesting to watch. The failure of F&F to attract attendance and the ongoing capacity issues at VB didn't help matters.

 

[zg44]

Yeah, those are probably good guesses fairly close to actuals,which translate into flat attendance with a small increase of revenue due to price increases as you said. Certainly not what Universal has been used to for a quarter's financials, even with the Japan issues discounted. WDW was experiencing issues that quarter also, which may have adversely affected Universal Orlando since Universal feeds off of WDW to a degree. All in all, not a good quarter, as many of us were predicting the past few months....October seems to be doing a bit better with a really strong HHN this year. But daily non HHN portion park crowds seem to be pretty similar to Oct. 2017, not significantly down or up. November & December will be interesting to watch. The failure of F&F to attract attendance and the ongoing capacity issues at VB didn't help matters.

Yep. The underlying growth numbers for UOR especially are probably the weakest they've been since pre-Harry Potter a couple of years. I think VB and all the advertising around it (and even last year's capacity controversies) probably boosted attendance more than expected last year, but then this year F&F has just not come even close to touching that; in terms of public mind share it's flopped compared to even Kong let alone the bigger needle movers.


I think this is probably a good thing in the long run though in that Universal big-wigs know that now they're really going to be fighting for visitors0 instead of relying on the nearly decade long boost from Harry Potter.


Harry Potter expansion, JP revamp, Nintendo, Illumination/DreamWorks properties and 2nd resort are the keys to UOR's next growth phase.

 

[quinnmac000]

Harry Potter expansion, JP revamp, Nintendo, Illumination/DreamWorks properties and 2nd resort are the keys to UOR's next growth phase.

While I agree with this statement, I believe growth will be more complicated than that. I think overall the GP is moving past IP and more product quality/value likely due to the resurgence of remakes, reboots, and other things. All which is probably why we are seeing flat growth.

Upcoming resort IPs will have to be good and enjoyable. Illuminations/Dreamworks products will have to entertain and beloved to drive the next growth phase for parks overall. Technology utilized will have to be useful. Capacity estimations when park designing will have to over anticipate the number of guests so they don't end up with a similar situation as they have with Potter and Volcano Bay. Comcast/NBCUniversal biggest issue overall is being reactionary instead of proactive in acquiring IP rights from other mediums such as books, comics, television, prior to them blowing up and becoming huge sensations as another company owns the rights limiting them/reducing potential future revenue, thats one thing the television/cable executives at NBCUniversal seem to understand way more than the film. Its literally Warner Bros biggest strength and a huge boon for USJ as Warner Bros produces/co-owns a lot of the popular properties also limiting Universal what they can use for their seasonal festivals as they would be required to split revenue.

Also in regards to USJ, I'm pretty sure a huge reason of the decrease is not solely due to weather but additionally Comcast not truly realizing the different in popularity of attractions nor the reasoning behind the parks huge growth in the past 8 years was the inclusion of popular Japanese IPs. This year Summer event was the weakest with the lack of new rights. Previously years they had more IPs of popular IPs being represented while this year they only focused on One Piece which despite how great and wonderful it does, doesn't attract people who aren't fans of one piece but of other Japanese IPs. additionally the revamp of a kids attraction from the extremely popular Yokai Watch to the somewhat popular Curious George probably affected attendance for those with children as well. They aren't getting the hottest IPs of the year compared to the past and I'm sure its mostly due to the current leadership/management structure as well as NBCUniversal Entertainment Japan not accurately surveying the audience in a manner to find what they want and synthesizing that information.

Unfortunately, Sky at the moment will be nothing of value to any of the theme parks as they just got into producing their own content rather than licensing/acquiring distribution.

 

[Mad Dog]

Yep. The underlying growth numbers for UOR especially are probably the weakest they've been since pre-Harry Potter a couple of years. I think VB and all the advertising around it (and even last year's capacity controversies) probably boosted attendance more than expected last year, but then this year F&F has just not come even close to touching that; in terms of public mind share it's flopped compared to even Kong let alone the bigger needle movers.


I think this is probably a good thing in the long run though in that Universal big-wigs know that now they're really going to be fighting for visitors0 instead of relying on the nearly decade long boost from Harry Potter.


Harry Potter expansion, JP revamp, Nintendo, Illumination/DreamWorks properties and 2nd resort are the keys to UOR's next growth phase.

Yes, and now that both Florida parks are hovering in the 10 million attendance range, it becomes tougher to bump those numbers up. Universal seemed to get a little overconfident after their 2014 Diagon opening, and, with the exception of Kong, backed off of the strong expansions that had characterized their success, and depended on less expensive 'filler' new attractions. Perhaps they put too much of their efforts, and faith, in VB, instead of maintaining the 'real theme parks' growth. Water parks are nice to help extend some families vacations, but even in the best of times their attendance isn't anywhere on par with attraction/ride/shows theme parks. They're an appetizer, not an entree. Too keep things fresh, and give a reason for people to visit, they need that 'boffo' type dynamic land or E ticket every X number of years. The Potter coaster is that type of attraction. And as I said before, it makes good business sense for Universal to get that open as soon as possible and not dawdle, even if they have to pay overtime costs. The Orlando market is wide open for them in 2019 with GESWL pushed back to the very end of 2019. Take advantage of Disney's slow construction schedules. Universal has done a good job with building hotels that are affordable, yet interesting and dynamic. This ensures that they should have a decent clientele of heavy spending visitors on site at all times of the year, and eliminates those long stretches of low crowds they've experienced in the past. Now it's more like just a real slow week or two here and there, rather than a couple of months straight of dead time. They've done a lot of good things since the Comcast acquisition. I think the Universal Park Execs. need to more fully embrace the Comcast strategy of aggressive business, something they couldn't do in pre Comcast days due to the bleak financials of their parent companies.