Comcast, the biggest seller of TV advertising in the U.S., thinks it can revive network ad revenues that have been slipping for years as ratings have plummeted. The Wall Street Journal reported the story last week without pausing to consider how much Americans hate Comcast. Now they’ll have even more reason to despise and fear the cable giant, since Comcast is about to start selling viewer data aggressively. As cable subscribers are undoubtedly aware, set-top boxes have always collected voluminous information on their viewing habits. Now, Comcast is going to package and sell the data to advertisers so that they can beam precisely tailored sales pitches into your living room. Using sophisticated algorithms and nuanced information derived from your viewing habits, they’ll be able to hit you with ads that know exactly what you want. Don’t expect these intrusions to be subtle or merely occasional.
In my household, we were ready to cut the cable anyway now that the monthly bill has gone above $280. This is simply too much to pay for a package that includes high-speed internet, two phone lines and 600 TV channels glutted with movie re-re-re-re-runs and commercials. Value-wise, $280 for basic cable service ranks right up their with $8 theater popcorn and the $250,000 college degree. Try to reduce that $280 charge, however, and you’ve got a fight on your hands. Tell Comcast you want to halve the bill by cutting out TV entirely, and they will shuck-and-jive you with some nonsense about how the package will actually cost more if you eliminate cable television, since you are presently getting a big discount for a ‘bundle’ of services.
The stock has had quite a run nonetheless, mainly because of the company’s extreme monopoly-pricing power. In many regions of the country there are simply no good alternatives to Comcast. Even so, you cannot alienate as many customers as Comcast has and continue to grow by leaps and bounds. And even in an industry where competition has been killed by regulators doing what regulators do, sooner or the paradigm must shift back in favor of customers.
If Comcast is eventually going to get its comeuppance, is this reflected in the price of its shares? Not yet. Like many portfolio managers’ favorites, CMCSA plunged in August but has since recouped most of the losses. Moreover, the August selloff surpassed only a single prior low on the monthly chart (see inset), suggesting the decline was merely corrective rather than ‘impulsive’. We’ll know better what lies ahead for the stock once we’ve seen how far this bounce carries. I’d be more bearish with the stock at marginal new highs than if it takes a second leg down without having exceeded July’s record-high $65. Whatever happens, Comcast is unlikely to treat its customers better until competition forces it to do so. Technology holds the answer. For a market so poorly served, attractive alternatives cannot be far off.