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Comcast Corporation (NASDAQ:CMCSA)

Goldman Sachs Communacopia Conference

September 24, 2013 12:25 p.m. ET

Executives

Michael Angelakis - Vice Chairman and CFO

Analysts

Jason Armstrong - Goldman Sachs

Jason Armstrong - Goldman Sachs

Okay, folks. You can take the seats. We’ll get started in 30 seconds. Okay. Welcome to the afternoon session here at Communacopia. I’m Jason Armstrong and I am joined and I am really happy to have Michael Angelakis with me from Comcast.

Michael, (inaudible) sort of just a broad opening question that may be framed at a subsequent discussion, but looking across sort of the cable and media assets maybe taking a longer term at three to five year lens, maybe take us through sort of the biggest opportunities for growth.

Michael Angelakis

Well, let’s talk about the lens and growth a little bit. For us the lens is a little bit more than three to five years. We really do have bit of a longer horizon. And when we think of growth, we actually do think of a concept that we call sustainable profitable growth. So really important for us when we think about horizons in growth that we want to grow revenue, operating cash flow and free cash flow, and those are sort of the three key financial metrics that we’re really focused on with regards to growth.

So we feel optimistic that we’re able to grow those three metrics pretty considerably over time. We think the company is uniquely positioned. We have about 20 million high-speed data customers. We have 22 million video customers. We have 10 million voice customers. We have a number of business services customers. Now at NBC with regard to both the broadcast and cable we represent about 20% of the market. So we think that our suite of assets or our asset base is pretty unique across the technology platform and media side and we are very focused on execution and very focused on growing those three metrics.

So that’s kind of a pretty large statement and you really got to go granular, go through the different business segments and if you want, I am happy to do that but go through sort of how we look at our video business and our high speed data business and let’s just go through. I think our video business, we’ve made massive investment in our video business. If you go back a couple of years ago, we did all digital DOCSIS 3. We went more high-def, we renamed the product XFINITY, and I think we transformed our video experience.

And since then over the last 10 quarters, nine of them we’ve had improved performance year-over-year. We continued to increase revenue in that business as well. And I think we’re about to with a new development of X1, our ultimately X2 and TV Everywhere and more VOD and more multiplatform, I think you’re going to see us again transformed that video product to be very much best in class. So our goal over time is to continue to grow the revenue of that business and hopefully at some point grow market share but we think we’ve now transformed the video product and have really terrific best in class product.

High-speed data, I think the numbers speak for themselves. Again we’ve made massive investment in our high-speed data product with DOCSIS 3.0. We’ve continued to increase speeds -- we increased speeds 11 times in 11 years and we continue to invest in that network. And we’ve increased our net adds by about 1 million customers for the last seven years, each and every year, and I think as the market grows we’re taking share because we actually invested in that product.

Voice, everyone kind of thinks that voice is a non-issue. But we have 10 million customers. We’re growing that business and that business is growing really nicely and as part of our triple play service and then when you think about our business services, which is really important, that business is growing in the mid to high 20s. And we really think that, that business has lots of room left to grow given our competitive position in that market and our product suite, we’ve really invested in that. So our core cable business, you’ve got – our team has done a great job. We really transformed that business I think to be much more innovative, much more of a technology leader, much more customer focused and I think we are going to continue to build on the momentum we have there and continue to grow that business.

NBC Universal, we’ve now owned it for two and half years, give or take. We've increased our operating cash flow by almost 50% during that period of time. And broadcast was a turnaround. We’re still in the process of turning around that business going from fourth to third. I think we have a shot at getting close to two, if not two. With that comes retransmission consent. With that comes better CPMs and I think we are making progress on all those fronts. Cable networks, great suite of services. Again we are going to continue to grow our advertising CPM. We’re going to continue to grow our affiliate fees. So very optimistic about that. And obviously our parks businesses had exceptional execution. That has grown very nicely. We’re investing there and when you think about even film which has a little bit more volatility, that’s performing much better than it did last year.

So we have a large complicated business but they are all connected with adjacencies in terms of we think about the telecommunications, technology, media platform and really the goal is to work together as one company to continue to innovate and grow that business along those three metrics. So little bit of a long-winded way for us to say we are optimistic.

Michael Angelakis

Sounds great. That’s a great overview. Thank you. Maybe if we talk about the cable business and you sort of laid out the framework for why you’ve moved the needle operationally, some of the things that have contributed to that. As we look at sort of the forward from here, it seems like there probably shouldn’t be any change in terms of your ability to continue to take strong market share as it relates to broadband, continue to hopefully improve the video subscriber trajectory and so we will focus on voice. Are there any headwinds that we should be aware of? I mean it all sounds like very bullish commentary as it relates to the product.

Michael Angelakis

Well, I think we are bullish -- as it relates to the product, I think we are optimistic related to the general economy and hopefully things are getting better compared to several years ago and I would clearly say we had some economic headwinds. Hopefully there is some benefit there but it really does center around the product and it really does center around execution. When we went all digital, we called that Project Cavalry three or four years ago. We clearly transformed the video product. I think we are about to do that again. Even with that transformation, we improved our results and our hope is that over time we will continue to improve our results.

On the broadband side, we are continuing to push our service. We think that we clearly have a better broadband product because of our investment in that and don’t really see too much headwinds. We are seeing AT&T a little bit with their project to a bit more overbuild, our overbuild is now about 43% in total compared to 41% 12 months ago, little bit about 14%, 15% with FiOS and about 28% or so with AT&T. By the way, none of that’s new though. So we’ve competed with both of those providers as well as [satellite folks] for a very long time and still I think put up improving results. So whether it’s video, data, voice or business services which we should spend a few minutes on, I think the economic environment hopefully is hopeful and I think our products are getting better and it’s really – our team is executing better.

Jason Armstrong - Goldman Sachs

Okay. On the economic environment, it just relates to residential, we talked about housing for quite a while now. There has been better and better indication as it relates to housing. There has always been sort of this lag effect as it relates to cable companies. Are we at a point in time where we can actually start to see benefits to you and the cable industry?

Michael Angelakis

I think it’s still a little bit early to be honest with you. I mean, there is not – we don’t think there is any material impact yet from housing starts or reduced vacancy rates that have sort of helped provide a meaningful tail into the business. I think the good news is compared to several years ago we actually had meaningful headwinds on those cycle. A little bit glimmer of hope is one thing we monitor very carefully besides housing stats and vacancy rates, is how much we actually spend on a [extension].

And if you go back to 2009 or so – I am sorry, 2007 or so, we were spending X dollars. And over the last couple of years we have been a fraction of that, there just really has not been much extension dollars. Now this year we started to see a little bit of a tick up, not that meaningful but a little bit of tick up where our field operation is asking for more capital for extensions. And that’s always a good sign, it’s better than the latter. It’s still a third of what we were investing in five years ago but it’s a tick up from where we were in 2012 and 2011. So we’re cautiously optimistic that’s going to help.

Jason Armstrong - Goldman Sachs

And is that – I know you said small, is it meaningful enough that it sort of continues to stage a better video trends year over year?

Michael Angelakis

I don’t think it’s meaningful enough to create a directional change, but we will take any wind in our sails. And for us that’s a good sign and I think as the – let’s take about housing stats. Housing stats historically have been between 1.5 million and 1.8 million housing starts per year and over the last few years, it’s been a third of that and that was bumped up a little bit to 800,000 or so. Listen, we are hoping that there is a little bit of tailwind, we think with our product set, we will get a disproportionate share, just haven’t seen it yet. And – but we are hoping we will get there.

Jason Armstrong - Goldman Sachs

X1 and now X2 announcements have been ahead of peers, ahead of largely what the industry is doing. There is a lot of buzz around this and rolling this out, that the question from the analyst community has been how is this starting to influence behavior and are you starting to see different metrics in these markets relative to legacy markets? Is there anything you can say related to that now?

Michael Angelakis

So I think it’s still early with regard to the X1 rollout. For those of you who don't know X1 is a new entertainment operating platform. It’s kind of a new IP based navigation platform that we have. We have rolled out X1 to about 85% of our service areas. It will be at 100% by the end of the year. We are connecting about 10,000 X1 every single day right now and that number will ramp over time. Clearly it’s a better experience for our customer base. We have a tremendous amount of VOD that we utilize. We do 400 million VOD views every single month. So on our 22 million video customer base, not all of them utilize VOD but the ones that do, we’re generating 400 million a month. It’s so much easier to navigate through the tens of thousands of choices we have, movies, TV shows. So our VOD viewing is up, our VOD revenue was up, our customer stat is up. So we are pretty excited about X1/X2 and we are gently ramping that up.

X2 is really a software download. So I think you'll see much more of that later this year, early next year. I kind of think about the Olympics as an interesting time for X2. But X1 right now we are really excited and we’re deploying it pretty quickly.

Jason Armstrong - Goldman Sachs

Let’s look to broadband quickly. Your pacing last quarter, sort of at least in the metrics the biggest positive surprise while it’s a consensus expectations, if you think about the pacing in the last seven years, we’ve had incredible consistency on this product, delivering over a million subscribers per year. Some would worry that we’re about to hit some penetration metrics that maybe flows through the industry. Does that in any way shape or form worry you up?

Michael Angelakis

I don’t really worry about that right now. If you think about our broadband business, I am more looking that as an opportunity. I mean from our broadband business we have 37% penetration. So I am sure you have a perspective on where you think broadband will ultimately go. From a market penetration it’s probably in the high 60s, 70% today. We see no reason why that number shouldn't be 75%, 80%, 85%, and we think with our investment in our broadband network, we should get a disproportionate share of that increase. So I think we are competing incredibly well against sort of the DSL and other competitors. And I think we are also looking at how we can penetrate more in terms of the growing share. And we’re pretty optimistic about it. You took the words out of my mouth, the last seven years, we’ve put on over a million customers. The same time we’ve raised ARPU because we increased speed by 11 times out of 11 years and our goal is to continue to do that.

Interestingly about a third of our customer base is 20 million customers, a third of our customer base takes a 50 meg product right now and we've increased that speed, I think you will continue to see us do that. So it's a terrific business for us. We’re going to continue to sort of keep the momentum within that business.

Jason Armstrong - Goldman Sachs

And when you think about the subscriber momentum relative to pricing, if we all sort of [inaudible] the back end of the broadband ARPU and how quickly it’s growing, to be fair, sort of low single digits seems like maybe there is some pricing you leave on the table, same time the volumes are great, but how do the balance the two?

Michael Angelakis

I wouldn't get too caught up in that, because I think that we are absolutely trying to think about how we continue to improve the product and we can talk about Wi-Fi as well but to continue to improve the product and obviously grow market share and now an interesting stat which I mentioned is 44% of our customers take all three services. And 77% of our customers take two services, primarily video and data. So really when you think about revenue and revenue growth and pricing, at least from our standpoint we’re looking at it from a customer relationship what is our yield, it’s not particularly how much was our video revenue increase but how much was our high speed data increase because when they are in a bundle and some of them are promotional, it’s really more about yield, because it’s awfully hard to sort of figure that out.

But when you do dissect it like you have, we have been growing ARPU sort of 3% per annum and we have grown our revenue base between 9% and 10% on the top line. We continue to grow customers and that’s the trajectory that we are proud of and want to try to continue.

Jason Armstrong - Goldman Sachs

Maybe switching gears to business services, which you mentioned obviously is a huge opportunity. Relative to your penetration now and where the opportunity is, Time Warner Cable this morning talked about doubling that business in the next four to five years. You said here sort of higher growth rates right now. So what’s sort of the opportunity for you in small business and then I guess medium sized business?

Michael Angelakis

Medium size. This is an enormous opportunity for our company. We’ve invested about $2.5 billion over the last five years in building the business services business. And today we have a $3.2 billion run rate business. We have accretive margins, we have meaningful free cash flow and we have, give or take, 10% to 12% market share. And we do divide this business into two categories, we divided into the small side which is businesses that have less than 20 employees and then we have the medium size which is larger, larger businesses.

When the business started five, six years ago, we actually focused on the small side of the business. And that has now grown really nicely. We are in very much execution mode. We think that particular business is around give or take $12 billion of market and it represents about 85% of our $3.2 billion. That’s still growing in the 20s and for us it’s really about execution and boots on the street and we made major investment in the product. If you go back to the product we’re selling video in dentists and doctors’ offices or other offices. We are selling 25-50 megabits in businesses that are competing against DSL and we’re selling sort of unified VoIP services compared to [pod]. So we think we are doing a terrific job and the team on our business services is very focused on growing that business.

The medium-sized business where over the last two years or so we’ve made all the capital investments across our entire network to have Metro Ethernet available there. That now is about 15% of our $3.2 billion and is growing in the 50s. And it’s a little bit of a more complicated sale, you are dealing with sometimes IP managers versus office managers. But we’re very optimistic and we are competing primarily against T1 WANs. They were offering 1 gig or 10 gig depending on what the customers want. So we are investing in that business pretty heavily and when we look at over the next three, four, five years, we have pretty strong expectations where we think again revenue, operating cash flow, free cash flow grow in that business. And if you think about our $3.2 billion of revenue, the small size as I said is probably 12.5% and the medium size is probably somewhere 12.5% to 15%. So we have a lot of room to grow in there.

Jason Armstrong - Goldman Sachs

But I think based on recent trends, people obviously trust the revenue opportunity in the space and a huge amount of penetration ahead of you, I guess one of the lingering questions just is what the next wave of growth looks like, when you talked about the first wave being so accretive, people sort of think low hanging fruit should be accretive. The next wave, you mentioned it, increased complexity in terms of how you are dealing with, can it be as accretive to the business as in the first wave?

Michael Angelakis

I think it can. I think that as we look at – if we look at over a multiple number of years, I'm not sure we’re operating at optimal scale right now. So at $3.2 billion business, 85% is in the small end, 15% is in the medium side and we still have accretive margins over that whole enterprise. To me as I think we build more scale in that business, our margins are going to improve. So I'm pretty optimistic that we can execute that, and part of it is we have the product set that’s competing against and we have a lot of customer relationships. And by the way we've done a terrific job of servicing that customer base. With a really sort of world-class mentality in terms of [phones can] be down, a very different mindset in terms of how we service both the small and medium sized businesses, and the team built – [Samper] and the team have done a great job of changing really everything from provisioning to technology to customer service to install and it's really very much in execution mode.

Jason Armstrong - Goldman Sachs

Let’s switch gears to XFINITY Home, your home security, home automation business. I think when this was initially launched from industry players, which is thought of as challenging the likes of ADT in home security and then automation sort of tagged along but it almost seems like the opportunity may potentially be more in home automation give the scope there, maybe help us think through that?

Michael Angelakis

Yes, I think that listen, the security business is a really interesting business and we are going to continue to pursue that business. And XFINITY Home provides a terrific security platform. I have it in my home, family is very pleased with it. It is clearly unique from a platform standpoint in terms of ability to use mobility and so forth. So we’re going to continue to pursue that and everyone is quite optimistic that this is a great product and we should penetrate more. I think there is a element and we've designed the product we just launched that isn’t the security monitoring department, it has more to do with energy management, it has more to do with how you're managing your home, if you do have – you can, it’s all either on a tablet or on a PDA, you can actually look at it differently where it’s not monitored by a security service, it’s almost self-monitored by you. Somebody opens a door, you get a text. You want to shut off the light, you want to turn on the light, you want to deal with your HVAC, you can do those kinds of things.

So I think this is the beginning and we are spending some time on how people manage their digital home. If you think about our suite of services, video X1, X2, how we think about VOD, how we think about TV Everywhere, inside, outside the house, tablet, mobile phone, online, how we think about cloud-based infrastructure, how we think about a Wi-Fi in the home, outside the home. I think this fits really nicely in from a platform perspective of how eventually we will move more to the digital home. And the goal for us has really been to leverage our network and leverage our customer relationships and I think this fits really well into it.

A couple stats that I was sharing with some folks in our one on ones is, almost half of our XFINITY Home customers are new relationships to Comcast. And the majority of those new relationships are taking all four services from us. So that to me, it’s early but directionally really positive. So we are spending quite a bit of time on that.

Jason Armstrong - Goldman Sachs

Let’s switch gears to content and on the cost side, I am going to ask you to keep the cable head one. You’ve over-indexed relative to the industry, which has been interesting for the last probably three years, I think you have been higher than the industry average in terms of programming and content cost growth per sub. Yes, you are the scale player, right? And so to me it either suggests you had a whole bunch of stuff (inaudible), you’re trying to lengthen the contract cycles, maybe all of that above. But I guess people are wondering when, does this suggest that we are at a point where we should be almost past this cycle and you’ve got all the big deals locked in, and we can get back to moderating programming cost growth?

Michael Angelakis

So I wouldn’t want to misrepresent that. I think it is a combination of all of the above. We’ve had cycle issues where you have step-ups. We have escalating retransmission consent fees. We have increasing sport costs. We are well aware of all that, understand all that but we've also been very proactive in going out and saying we want lots of current season, bankable season. We want lots of library, we want sports rights. We want tablet rights. We want PDA rights, in the home, outside the home. We want more VODs and obviously that comes at a cost. So we are going longer-term. We now I think have more content rights than anybody. That’s the data I use where we have 400 million VOD views every month. That content is terrific content. So part of it is a nature of the beast in terms of we have contract renewals, we have retransmission consent, those are just part of renewal process and part of it is that’s proactively going out and saying we want more and more rights, so we can provide a multi-platform experience and we realize that costs money.

So overall programming costs are a challenge, a real challenge. I think we are trying hard to keep them as low as possible but getting many rights as we possibly can and over time as I think we said before, I think we can manage the cable business and absorb those rights costs with pretty flat margins and our margins are highest in the industry. So I think it's a bit of doing multiple things at the same time. But we feel really good with what our content rights look like. If you're really good with how we’re utilizing them on multiple platforms and applications and at the same time yes, we are absorbing some of those but I think we will manage to do that.

Jason Armstrong - Goldman Sachs

As you think about sort of holistically where you want the rights portfolio to be, is there a percentage you can give us in terms of aggregating to that?

Michael Angelakis

Yes, we want it all. No, I am kidding. We really want to provide our customers the best video experience so that if they want to watch a TV show, a movie, a documentary, they don't have to go to any other platform but a Comcast platform. So – and if they want to watch it in their bed with a tablet, they want to watch it while they are in a hotel room in New York City, they want to watch it online at home, we want to provide that ubiquitous experience where they can do that. And it’s a real goal for our company to aggregate as many rights as we can on as many different platforms to provide that customer with the best experience.

Jason Armstrong - Goldman Sachs

You talked about flat margins which has been impressive –

Michael Angelakis

Stable, we’re better than flat, I guess.

Jason Armstrong - Goldman Sachs

Stable margins. Despite the elevated programming costs that you say, what are the factors from here like that might contribute to margin expansion?

Michael Angelakis

I wouldn’t count on too much margin expansion. I know people like to talk about that. But we also play a lot of offense and with offense comes us investing in new businesses like everything we just talked about with XFINITY Home, we just talked about the medium-sized business area. Those take OpEx type investments. Whereas marketing a transformational brand with XFINITY, and you know XFINITY now has a 40% higher favorability rate than it did three years ago. We’ve made tremendous progress against our competitors’ brands. All that takes investment and we do use a lens, an investment lens.

So from our standpoint we have some real benefits, primarily product mix, more efficiency within the business, taking costs out. So within our cable organization there are some real benefits for margin expansion. You take about business services, high speed data, advertising, film, those are the positives. Efficiencies and cost take-outs, those are positives. We have programming costs, marketing, investment in new areas. So it’s a little bit of a balance but as I said a few minutes ago I think we are pretty comfortable with sort of stable margins and still playing a lot of offense, whether it's on garnering more rights or whether it's on investing in new areas of growth for us.

Jason Armstrong - Goldman Sachs

Great. Let’s switch gears to the NBC side. You touched in sort of holistic umbrella comment around (inaudible) on the gap, which encompasses cable, encompasses broadcast, a lot of us sort of understand the potential opportunity but maybe struggle with the timeline to get there. There are sort of stair steps in the process that we might see.

Michael Angelakis

Yes, I mean I tend to call it the modernization gap, I think Steve calls it the entitlement gap. So I think the way we look at is really two major components. One is what we get paid from distributors for the content that we’ve created, whether that falls into retransmission content, whether it falls into reverse comp, whether that falls into cable affiliate fees, and obviously from a affiliate sales standpoint, our team sells all those basically as one group. We have one group that manages all that.

The second side is really from an advertising and a CPM standpoint. So on the first part, with regard to the broadcast network, I will just throw out a couple numbers so people understand the trajectory. In 2011, really the first year that we operated NBC Universal we generated $4 million of retransmission consent. That number went to $40 million and now it’s around $200 million. And frankly we’re still a laggard compared to some of our peers whether they be some of the other broadcast. But we know that we want to get mark to market at some point as contracts renew and it’s pretty good line of sight in terms of how one would mark that to market. So we look at that as a real opportunity.

On the cable programming side, there are some similarities where again we think we are providing great services. USA has been a number one cable channel for five years. CNBC, MSNBC, terrific channels, you compare them to some of the other news organizations on the cable side, Bravo has done really well. SCI FI has done really well and so forth. And I think our goal over time is to monetize them a little bit better and to close some of that monetization gap we may have with channels that have some similar genres, maybe even less, maybe a little more ratings depending on who we’re talking about. And one of the goals of the NBC Universal organization is to over time both on the retran side and on the cable affiliation is to close that monetization gap. That will take years.

I think we've been very clear that it’s going to take us time to do that. It doesn't happen in one year, one quarter. That’s a multiple years for us to secure that additional revenue. But you feel pretty good about it. You think that we are executing well against it and folks feel pretty good. Now you go to the advertising side which again has some similarities. The broadcast network was in fourth place for 10 years and moved up to number three, and I think we can make an argument that’s actually the number two rated network right now and along with that comes what we think should be CPM increases. We had a very good upfront some similarities with cable where some of the channels are doing really well and there are some deltas with regard to CPMs that we are trying to close. So on both sides of that equation we are working really hard to close those monetization gaps where we think that we've been sort of underway given what we are producing whether it’s on the broadcast side or whether it’s on the cable side. So it’s a big priority for the organization and I think we will pursue it pretty aggressively over the next three, four years or so.

Jason Armstrong - Goldman Sachs

Great. Let me ask one on leverage and then we’ll turn it over to some audience questions. Post the NBC buy-in, you talked about sort of a new leverage ratio framework, moving into that target ratio over the course of time. I guess a couple questions related to that. The first is should we think of this as a commitment to numerator and denominator, total leverage moving down, EBITDA growing, and that’s how you’re growing this ratio or are you instead comfortable with leverage where it is and EBITDA growth and its ratio?

Michael Angelakis

It’s a little bit of both. So I don't want to be so precise but I think that you can obviously – if we say that the leverage will come down over time, the leverage ratio will come down over time, for the most part you are going to see EBITDA grow, and maybe there will be some modest delevering in terms of absolute dollars. But from our standpoint this is a multi-year focus for us. We don't want to change our trajectory on return of capital. We've done really nice with we’ve increased the dividend over the last three, four, five and since 2008, we've been buying back stock. I think you continue to see us do that. So we do think we can multitask here or we can modestly delever over time. We can provide a nice yield and return of dividend. We can buy back stock and hopefully provide the shareholders with a really substantial operating performance as well, that I don’t want to lose sight of how critically important that is for us.

Jason Armstrong - Goldman Sachs

The follow-on question is, how linear do you want this has to be – and the derivative question, if the right opportunity came along to do something strategic that may pump up the ratio for a period of time but then if you’re committed after, is that something you engage in?

Michael Angelakis

It would have to be financially exceptional for us to think about that. We just did NBC and people forget, we actually just bought the last part of NBC Universal literally six months ago. So I think we are still trying to make sure that we’ve got everything going really there and it feels quite good now. But I don't know – I think we are on the right path where we want to be.

Jason Armstrong - Goldman Sachs

Are there any questions from the audience? If you have a question, raise your hand. There’s one back here.

Question-and-Answer Session

Unidentified Analyst

How do you see the evolution of your theatrical film business going forward? Would you just try to for maintaining profits (inaudible) going to movies?

Michael Angelakis

Make sure I understand the question. Our view on theatrical film business? It has some challenges obviously losing DVDs in terms of what that revenue source has been and profitability of that has created what I would consider to be some structural challenges. We’re trying to work through that with regards to how we craft the slate or construction of that slate. Obviously we’re doing much more on animation with illumination. We are doing more with some sequels like Fast 6 earlier this year. So for us recognizing that there are some issues around really the deterioration of DVD revenues that how do we sort of build a slate that we think has a modest risk component, has appropriate upside and hopefully some limited downside. And I think we've actually done well this year with that.

I think I’ve got my numbers right but in the last year if you look at year-to-date I think we lost about $70 odd million in the film business and this year, year-to-date I think we’re up about $100 million or so cash flow if I get that right. So we’re trying to make progress there. Obviously it has its own challenges. We just brought in a new CEO Jeff Shell who worked for Comcast for a number of years or over, in the international for NBC Universal. International obviously is a much bigger component now of the film business. So I think Jeff is a terrific executive and I think will change some things and look at some of those challenges and how we approach it. But we really want to run a pretty profitable film studio.

Unidentified Analyst

I was talking to one of your larger TV affiliates, with NBC affiliates and they said they're currently not paying anything yet for affiliate fees to the network. So I was curious if you could give us a sense of like what percentage of your non-owned affiliates are paying fees and how much of an opportunity that is going forward?

Michael Angelakis

When I think about retransmission consent, that includes the fees that we would garner from affiliates. So I think over time we are going to reach agreements as affiliate contracts come up where I think we're going to garner a meaningful percentage of retransmission consent, no different than some other folks are doing. So that goes back to Jason's point of timing of some of this, and we’ve renewed a number of affiliate relations, affiliate agreements on the network side where we now have what I will consider to be a more market situation where we are sharing in some of that retransmission consent revenue.

So we’re out-buying – we’re out buying the Olympics, we’re buying a whole variety of products for NBC Universal. And if you look at just even last night, we had a voice open last night in Blacklist. We’re trying to really enhance the value of that network to the benefit of affiliates and I think all we are asking for is pretty similar to what other broadcast networks are.

Jason Armstrong - Goldman Sachs

Any other questions? One right here. Please wait for mic.

Unidentified Analyst

How do you think about TV Everywhere and where do you see the greatest opportunities or risks for your business both as a cable operator and as a developer of media content, TV Everywhere?

Michael Angelakis

Yes. I think there is a natural partnership for TV Everywhere for both what I would call the cable distributor as well as the content provider. So given our unique position with NBC Universal and Comcast Cable, we really look at TV Everywhere as a benefit to both sides of the house. It enhances the customers’ experience. From a cable distribution side, someone who is paying a monthly video fee to us for their ability like I mentioned access TV Everywhere across different platforms, we think is really important. In addition, from a content owner to have customers be thrilled and excited to watch that content and not just in one platform, we think it really ultimately enhances the value of the content as well and ultimately advertising if you’re thinking about that next step.

So there is no doubt in my mind that TV Everywhere is really a beneficial component to both the distribution side and content side. And we’re big believers in it. We're continuing to do more and more and more with TV Everywhere and having people utilize that service.

Unidentified Analyst

Hi, right here. Can you give us more explicit details on your ambitions for Spanish language, I guess, balancing the gap between you and the other major player, you’ve made some hiring decisions from them, just how big and meaningful do you think this can be to overall Comcast?

Michael Angelakis

So what I think you are asking is, we own Telemundo. And Telemundo we think has a terrific reach, done relatively well over the last couple years since we owned it in terms of ratings. And we have one large competitor primarily Univision, that’s what I think your question is. So we have hired [Joe Yuba], Marlene Dooner who is sitting right here who is head of IR is actually moving couple months, Marlene, sorry to point you out but I won’t embarrass you. And she will be going over to Telemundo. So we look at it as a very substantial opportunity. We’re investing in a whole variety of programming around Telemundo and if you look at just even our ratings we are doing better and better. We just invested, I want to say – I could get exactly when but sometime last year with future World Cup rights. So from sport side and the news side, so there is a opportunity set that we are working through and we have changed some management to pursue that. So we are excited, we’ve got a lot of work to do. Univision is a terrific competitor, but we really do look at it as an opportunity and that market is very attractive to us.

Jason Armstrong - Goldman Sachs

Maybe I will wrap up with just one last question. It’s sort of going back to your comment around, if you did anything you had to find some sort of exceptional value.

Michael Angelakis

Are we going to go back to that?

Jason Armstrong - Goldman Sachs

We are going back one last time. And the reason I go back to it is that the cable industry is sort of caught in this enthusiasm for consolidation at this point. A lot of people are sort of bidding on programming cost and things is the only way we play it. I look at you and see your revenue performance, the operating metrics, the type of things you have out there that ultimately you can license to other companies, the technology leadership. Feel free to answer that way. (inaudible) to be beneficial across lot of assets, the balance sheet that provides you, probably the best ability to refi target them. It just seems like you could have very, very accretive opportunities in cable consolidation at this point. I am wondering why you are not part of this conversation?

Michael Angelakis

I think from our standpoint, a lot of the conversation has been about scale and the benefits of scale. We're already at 22 million video customers. We actually think we have meaningful scale on the distribution side and we also think we have meaningful scale on the content side. We don’t particularly believe that having a couple million more customers to our footprint is going to change dynamics around content costs. By the way on the technology side, we want to be collaborative with other cable operators on a whole variety of different services. So I think to answer your question, do we love the cable business? We love the cable business. Do we think that would we be interested in something that had a really terrific financial return for us? Sure. We would absolutely look at that. But we have been quite seamless. Prices for – this is going back prior to some of this push is, have been pretty high and we prefer to buy our stock and we prefer to do other things. So I think it’s a financial decision in terms of getting larger. We think we have scale. I think people who are talking about it are looking for the benefits of scale whether it be on the programming side or the technology side, I think we’ve already executed on that.

Jason Armstrong - Goldman Sachs

Great. Well, Michael, thank you so much for coming.

Michael Angelakis

Okay. Thanks.

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