1500 Market Street
Philadelphia, Pennsylvania 19102
Telephone: (215) 665-1700
Fax: (215) 981-7790
Sales: $4.91 billion (1997)
Stock Exchanges: NASDAQ
Ticker Symbol: CMCSK
SICs: 4812 Radio Telephone Communications; 4813 Telephone Communications, Except Radio Telephone; 4841 Cable & Other Pay Television Services; 4899 Communication Services, Not Elsewhere Classified; 6512 Operators of Nonresidential Buildings; 7941 Professional Sports Clubs & Promoters; 7999 Amusement & Recreation Services, Not Elsewhere Classified
Comcast Corporation is a diversified global leader in entertainment services and telecommunications.
Comcast Corporation is a leading cable, telecommunications, and entertainment firm. The company's earliest roots are in cable television, and Comcast Cable is now the fourth largest cable company in the United States, with 4.4 million customers in 21 states. Comcast Cellular serves 783,000 cellular telephone customers in Pennsylvania, New Jersey, and Delaware. Comcast also is a partner with Sprint Corp., Tele-Communications Inc., and Cox Communications Inc. in the Sprint PCS digital wireless telephone joint venture. In content, which provides the most revenue of the company's three sectors, Comcast holds a 57 percent stake in QVC, Inc., the leading cable television shopping channel; has a controlling interest with the Walt Disney Company in E! Entertainment Television, a cable channel devoted to entertainment and celebrity programming; and holds a majority interest in the Philadelphia 76ers NBA basketball team, the Philadelphia Flyers NHL hockey team, the Philadelphia Phantoms minor league hockey team, two indoor sports arenas, and Comcast-Sports Net, a 24-hour regional sports network serving the Philadelphia area. The company also holds stakes in a number of other content providers. Controlled by the Roberts family of Philadelphia, Comcast also has the powerful backing of Microsoft Corp., which owns 11.5 percent of the company.
Originated with Tupelo Cable System
Comcast has its origin in the early 1960s with American Cable Systems, Inc., a small cable operation serving Tupelo, Mississippi. At the time, American was one of only a few community antenna television (CATV) services in the nation. The CATV business was predicated on the fact that rural areas were underserved by commercial television stations which catered to large metropolitan areas. Without CATVs huge antennas that pulled in distant signals, consumers in these areas had little use for television. Although required to pay for CATV, customers considered the benefits worth the cost.
In 1963 Ralph J. Roberts and his brother Joe sold their interest in Pioneer Industries, a men's accessories business in Philadelphia, and were looking to invest the proceeds in a new industry. After some research, they learned that the Jerrold Electronics Company, the owner of American Cable Systems, wished to sell the CATV concern. The Roberts brothers enlisted a young CPA named Julian Brodsky, who had helped them liquidate Pioneer Industries, and Daniel Aaron, a former system director at Jerrold Electronics, to help them evaluate the opportunity. The four agreed that while the system carried only five channels and served only 1,500 customers, the investment had great potential. Ralph Roberts bought American Cable Systems and later asked Brodsky and Aaron to join him in managing the company.
Growth within Tupelo was difficult, however. At times, the three were forced to serve as door-to-door salesmen. By 1964 they decided to buy additional franchises in Meridian, Laurel, and West Point, in eastern Mississippi. The following year, American acquired more franchises in Okolona and Baldwyn, Mississippi. While these acquisitions succeeded in increasing subscribership, they failed to have much effect on penetration; there remained an insufficient number of subscribers to deliver a high return given the cost of setting up a local system.
Expanded Aggressively in the Late 1960s and 1970s
Roberts turned his attention to the bigger potential market of Philadelphia. In 1966 he bid successfully for cable franchises in Abington, Cheltenham, and Upper Darby, all northern suburbs of Philadelphia. He then purchased the Westmoreland cable system that served four other communities in western Pennsylvania. To achieve better economies of scale, Roberts dovetailed Westmoreland's operations with those of his other franchises. After establishing a strong foothold in suburban Philadelphia, Roberts extended his company's presence into six additional local communities.
Highly leveraged from this acquisition binge, but eager for more opportunities, Roberts enlisted the Philadelphia Bulletin newspaper for a joint venture to build additional cable systems serving Sarasota and Venice, Florida. As part of a limited diversification in 1968, Ralph Roberts joined his brother Joe--by then a minor partner in American but also an executive vice-president of Muzak Corporation--in purchasing a large franchise to provide the subscription "elevator music" service in Orlando, Florida.
Having decided that the name American Cable Systems sounded too generic for his growing company, Roberts decided in 1969 to change its name. In an effort to build a more technological identity, he took portions of the words "communication" and "broadcast," creating Comcast Corporation and reincorporating the company in Pennsylvania.
Comcast reorganized its operations somewhat in 1970, selling off its Florida operations to Storer Communications and forming a limited partnership to purchase Multiview Cable, a local franchise serving Hartford County in Maryland. Limited partnerships enabled Comcast to finance growth with a minimal use of operating funds and were used to finance subsequent acquisitions. Predicting growth in the Muzak business, Comcast also acquired a franchise in 1970 for the service in Denver. The company later purchased Muzak franchises in Dallas, San Diego, Detroit, and Hartford, Connecticut.
Boasting 40,000 customers, but hampered by a continued stagnation in subscriber penetration rates, Comcast still needed funds to finance further expansion. In 1972 Roberts decided to take the company public, offering shares on the OTC market. In 1974 Comcast purchased a cable franchise for Paducah, Kentucky, and in 1976 acquired systems in Flint, Hillsdale, and Jonesville, Michigan. The following year, Comcast bought out its partners' interest in Multiview.
Cable by this time had become much more than an antenna service. For several years, cable operators included local access and special programming channels, as well as programming from large independent stations such as WGN in Chicago and WTBS in Atlanta. The government restricted what programming a cable operator could offer, often blocking access to programs that customers clearly wanted. Dan Aaron, a manager with Comcast was active in the National Cable Television Association (NCTA), lobbying effectively for the relaxation of programming and other restrictions. In 1977, as chairman of the NCTA, Aaron brought many of the industry's efforts to fruition. As the cable industry was allowed to mature, additional cable-only stations were added, making the service viable within metropolitan areas that were well served by broadcasters.
With this added strength in the company's product offerings, Comcast was able to win franchises to serve parts of northern New Jersey in 1978, as well as Lower Merion, Pennsylvania, and Warren and Clinton, Michigan, in 1979. Through limited partnerships, the company later won franchises for Sterling Heights and St. Clair Shores, Michigan, and Corinth, Mississippi. By 1983 Comcast had purchased Muzak franchises in Indianapolis, Buffalo, Scranton, Pennsylvania, and Peoria, Illinois.
Expanded into the United Kingdom in 1983
The company made an important move in 1983 when, in partnership with a British gambling and entertainment enterprise, Ladbroke, it won a license to establish a cable television system in the residential suburbs of London. Most cable licenses in the United States had been taken, and those that remained were expensive or only marginally profitable. But the industry was still in its infancy in the United Kingdom. In addition, British viewers would appreciate cable's selection; Britain had only about five stations, offering mostly government-supported programming.
In 1984, as Comcast added a cable partnership in Baltimore County and a Muzak franchise for Tyler, Texas, an important change took place in another industry. After a half century of antitrust litigation, the U.S. government broke up the Bell System. As a result, AT&T and its long distance operations were separated from 22 local Bell companies. Each of these Bell companies was organized into one of seven companies that saw cable television as the next logical course of progression for their telephone networks. The U.S. Congress, however, had already enacted legislation that would prevent telephone companies from taking over the still fragile cable industry. The Cable Act, which was written primarily to guarantee fair pole attachment rates to cable companies, had the effect of locking telephone companies out of the cable business.
Free for the moment from the ominous threat of competition from any of these multibillion-dollar companies, Comcast proceeded with growth through acquisitions. In 1985, after purchasing cable operations in Pontiac/Waterford, Michigan, Fort Wayne, Indiana, and Jones County, Mississippi, Comcast won a plum: the right to serve the densely populated northeast Philadelphia area. In 1986 Comcast took over a cable system serving Indianapolis and purchased a 26 percent share in Group W, one of the country's largest cable companies. This brought the company's subscribership to more than one million customers. The following year, Comcast acquired a cable system in northwest Philadelphia from Heritage Communications, thus cementing its position in suburban Philadelphia.
Turning more toward investments in other cable companies than in actual franchises, Comcast purchased a 20 percent share of Heritage Communications and a 50 percent share of Storer Communications in 1988. The Storer acquisition brought subscribership to more than two million customers and elevated Comcast to the fifth largest cable company in the United States. Consolidating its partnerships, the company took full control of its Maryland Limited Partnership, Comcast Cablevision of Indiana, and Comcast Cable Investors, a venture capital subsidiary.
Moved into Cellular Service in 1988
Also in 1988, Comcast turned an important strategic corner regarding telephone companies when it purchased American Cellular Network, or Amcell, a cellular telephone business serving New Jersey. For the first time, cable and telephone companies, prevented from competition in landline services, were facing each other in the cellular telephone business. And for the first time, a cable company was able to offer telephone customers an alternative to the telephone company.
In 1990, a year after relocating the corporate offices from Bala Cynwyd, Pennsylvania, to Philadelphia, Ralph Roberts shocked the company and the industry by naming his 30-year-old son Brian to succeed him as president of the company, while Ralph Roberts remained as chairman. Brian Roberts, who had impeccable academic credentials, silenced critics by proving to be a highly effective manager. In addition, having begun work in the company at the age of seven, he had 23 years seniority, more than virtually anyone but his father.
Also in 1990, after having purchased an interest in an additional franchise serving suburban London, the company's newly formed international unit won more British franchises, allowing the company to serve Cambridge and Birmingham. Comcast now counted more than one million customers in Britain alone. Increasingly, however, Comcast's smaller companies, such as Amcell, were beginning to experience slower growth. Rather than allow Amcell to be swallowed up later by a larger suitor, Comcast struck a deal in 1991 with the Metromedia Company, in which it purchased that company's Metrophone cellular unit for $1.1 billion. The new joint company, established in 1992, quadrupled Comcast's potential market to more than 7.3 million customers.
Later that year, the company's offices at One Meridian Plaza in Philadelphia were destroyed by a fire that took 19 hours to put out. Only eight days later, the company set up shop four blocks away at 1234 Market Street. While officially a temporary location, the company's 250 employees were once again in business.
In September 1992, Comcast staged a five-way international telephone call using the Comcast network and a long-distance carrier. The purpose was to demonstrate that the company could handle telephone calls and completely bypass the local telephone network. While the demonstration was intended to raise investor interest in such bypass operations, it also succeeded in scaring telephone companies sufficiently to argue for permission to offer cable television services. The company continued to bolster its position in the bypass business in 1992, when it gained a 20 percent interest (later reduced to 15 percent) in Teleport Communications Corporation, operator of a fiber-optic-based bypass telecommunications network which by the mid-1990s was serving more than 50 major markets nationwide.
Late in 1992, Comcast took over 50 percent of Storer Communications, dividing the assets of that company with Denver-based Tele-Communications, another leading cable firm. Storer was forced into dissolution by heavy debt carried at high interest. The proceeds from the sale enabled Storer's parent company, SCI Holdings, to retire much of that debt.
Aggressive Moves into Content Highlighted Mid-1990s
The mid-1990s saw a frenzy of activity throughout the cable and telecommunications industries, as deregulation increasingly brought cable and telephone companies into competition with each other, as well as into partnerships. The period also saw a flurry of acquisitions, mergers, and system swaps in the cable industry as companies sought to build networks of contiguous systems to improve efficiencies. Comcast was at the center of all of this activity, and also made aggressive moves into the area of programming content.
As early as 1992, Comcast had begun testing a forerunner of what eventually became known as the Sprint PCS (personal communications services) digital cellular technology, which delivered crisper sound and more security than analog cellular phone technology. In 1994 Comcast entered into an alliance that formed the Sprint Telecommunications Venture, renamed Sprint Spectrum LP in 1995. The alliance partners were Sprint Corp., owning 40 percent of the venture; Tele-Communications Inc., 30 percent; and Comcast and Cox Communications Inc., 15 percent each. In the early 1995 Federal Communications Commission (FCC) auction of PCS licenses, Sprint Spectrum was the biggest winner, gaining the rights to wireless licenses in 31 major U.S. markets, covering a population of 156 million. The venture was soon renamed Sprint PCS and the four partners spent millions of dollars building a wireless network. In 1997 Comcast's cellular operations in Pennsylvania, New Jersey, and Delaware were converted to the digital technology, but by then the company considered Sprint PCS--which faced tough competition from cellular veterans such as AT&T Corp.--a drag on earnings. In May 1998 the Sprint PCS partners announced that they planned to sell 10 percent of the venture to the public through a public offering, with Sprint PCS set up as a tracking stock under Sprint's corporate domain (shareholders of tracking stocks have very limited voting rights). This move was considered the first step toward the possible exit of Comcast, Cox, and TCI from the joint venture. Meanwhile, in January 1998, Comcast acquired GlobalCom Telecommunications, a regional long-distance service provider. Along with the company's other operations, the addition of GlobalCom--renamed Comcast Telecommunications&mdash-abled Comcast to offer a full range of telecommunications services.
In cable, Comcast in 1994 acquired Maclean Hunter's U.S. cable operations for $1.27 billion, gaining an additional 550,000 customers. In November 1996 Comcast acquired the cable properties of E. W. Scripps Co in a $1.575 billion stock swap. Scripps's 800,000 customers brought Comcast's cable holdings to more than 4.3 million customers in 21 states, the fourth largest cable system in the United States. In February 1998 the company agreed to sell its underperforming U.K. cable operations to NTL Inc. for $600 million in stock plus the assumption of $397 million in debt. Three months later, Comcast announced that it would spend $500 million over the next several years to take over the 30 percent interest in Jones Intercable Inc. held by the Canada-based BCI Telecom Holding Inc. Jones had a technologically advanced, one-million-customer cable system, much of which was in the suburbs of Washington, D.C., strategically contiguous to some of Comcast's main markets.
Comcast's aggressive moves to become a major provider of entertainment content were perhaps the company's most dramatic actions of this period. Already holding a 13 percent stake in QVC, Inc., the number one cable-based shopping channel, Comcast in July 1994 scuttled at the last minute a planned merger between QVC and CBS Inc. by offering to pay $2.2 billion for a controlling interest in QVC. CBS, refusing to engage in a bidding war, immediately retreated, leaving Comcast to increase its QVC interest to 57 percent. In early 1996 Comcast paid $250 million to acquire a 66 percent stake in a new venture, Comcast-Spectacor, L.P. Most of the remaining ownership interest was held by Spectacor, which owned the Philadelphia Flyers NHL hockey team and two sports arenas in Philadelphia. Comcast-Spectacor was set up to own and operate the Flyers, the Philadelphia 76ers NBA basketball team, and the two arenas. Comcast then leveraged these ownership interests into establishing Comcast SportsNet, a 24-hour regional cable sports channel, which debuted in the fall of 1997 and featured telecasts of Flyers, 76ers, and Philadelphia Phillies (major league baseball) games, in addition to other sports programming. In March 1997 Comcast partnered with the Walt Disney Company to acquire a majority interest in E! Entertainment Television, a 24-hour cable network devoted exclusively to entertainment and celebrity programming. E! was available in more than 45 million homes in more than 120 countries around the world.
In June 1997 Microsoft Corp. announced that it would invest $1 billion in Comcast in return for an 11.5 percent nonvoting interest. Microsoft wanted a cable partner for testing interactive television and high-speed computer services, and chose Comcast because its cable system was one of the most technologically advanced in the country. By the end of 1997, Comcast had converted about 70 percent of its customers to a new hybrid fiber-coaxial technology, which was more reliable, offered improved signal quality, and had the capacity to deliver more services. The company was also a partner--with a 12 percent interest--in At Home Corporation. Comcast@Home was launched in December 1996, offering high-speed interactive services, including 24-hour unlimited Internet access, through a cable modem to customers in Baltimore County, Maryland, and Sarasota, Florida. Additional markets were soon added.
In 1987 Comcast Corporation was almost exclusively a cable television company. Just ten years later, cable was no longer even the company's largest unit. Out of 1997 revenues of $4.91 billion, $2.083 billion (or 42.4 percent) came from the company's content operations, $2.073 billion (42.2 percent) came from cable, and $444.9 million (9.1 percent) came from cellular. Clearly, Comcast was not a firm that rested on its laurels. And with the partnership with Microsoft promising involvement in additional innovative technologies and services, Comcast seemed certain to be a central player in the high-tech world of the 21st century.
Principal Subsidiaries: Comcast Cable Communications, Inc.; Garden State Cablevision L.P. (50%); Primestar Partners, L.P. (10%); Comcast Cellular Communications, Inc.; QVC, Inc. (57.45%); Comcast Spectacor, L.P. (66%); E! Entertainment Television, Inc. (79.2%); At Home Corporation (12%); Sprint Spectrum Holdings Company, L.P. (15%).
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