September 3, 2013
It's the summer of Watergate and the Munich Olympics - June 1972 - and you heard about a little company with 40,000 cable-TV subscribers that was selling stock in an initial public offering for the modest amount of $7 a share. What the heck - you told your broker to go for it and bought 1,000 shares in Comcast Corp. Bad move, it seemed. Those $7 shares quickly plunged to 75 cents because of broader economic worries during the Nixon administration and the Mideast oil crisis. You threw the stock certificates in a drawer and hoped for the best. They gathered dust.
How much are those 1,000 shares at the $7 IPO price worth today? That would be $6.2 million, last week.
The same amount invested into the S&P 500 Index with reinvested dividends over the same period would be worth one-sixteenth as much, or $381,580. "You have some spectacular IPOs that did very well and some that did poorly," Jeremy Siegel, a professor at Penn's Wharton School, said Thursday. "Obviously they did very well."
Other than Comcast insiders - such as cofounder Ralph Roberts, now 93 - very few people, if any, still own Comcast shares from the early 1970s. But the explosive appreciation in stock value, 18.1 percent a year with reinvested dividends and stock splits, is a good proxy for the relentless drive for revenue and profits at the Philadelphia company whose gleaming skyscraper dominates the city's skyline. Today, after years of aggregating cable systems, it's one of the most influential companies in the TV and entertainment industries and poised to leverage its TV business onto the Internet.
Brian Roberts, one of Ralph's sons and the chief executive officer, flashes the chart of these two returns at Comcast's annual shareholder meeting each year as he concludes his remarks, saying it's the track record that makes him most proud. But old-timers will tell you it wasn't a foregone conclusion. "You had a choice," said Julian Brodsky, a company cofounder and former chief financial officer, of the 75-cent Comcast share price in the 1970s, "you could go to a bar and have a beer or you could buy a share of Comcast."
The economy recovered and so did Comcast stock. HBO began offering premium content in the 1980s, transforming the industry from an antenna service to an entertainment service. People subscribed by the thousands. Those 1,000 shares were worth about $49,000 a decade after the IPO. Comcast added new cable territories during the franchise wars of the 1980s and bought the Westinghouse and Storer Communications cable systems, adding hundreds of thousands of subscribers.
The company began the decade as the 20th-largest cable company and finished as the fifth-largest. Comcast purchased cable systems as price regulation and the threat of competition from satellite-TV and telephone companies alarmed family-owned cable companies in the 1990s. Many times, Comcast borrowed money to pay for its acquisitions and modernize its network instead of issuing new stock. "Time and again we would incur more than the usual amount of debt," said Brodsky. "This gave us the added power of maximizing gain through minimizing shareholder dilution."
Those original 1,000 shares were worth more than $450,000 by 1992. It was a transitional decade in leadership. Ralph Roberts handed the company over to his son, Brian, and he hired Steve Burke. The U.S. deregulated cable prices with the Telecommunications Act in 1996. The next year, Microsoft's Bill Gates invested $1 billion into Comcast so it could upgrade its network for the Internet - a big chest bump.
The Comcast stock price had a great run in the late 1990s, synchronous with the dot-com bubble, and in 2002 Comcast agreed to purchase AT&T Inc.'s cable systems, making it the nation's largest cable-TV provider. Those 1,000 shares were then worth $2.4 million. The company faced questions in the post-2002 era over its customer service - bad! - and obsolescence, as more video was delivered over the Internet, a la Netflix. But even as investors predicted its demise, Comcast kept growing with regional sports networks, business services, and cable advertising. Brodsky said the Roberts family's super-voting stock - Brian Roberts holds 33 percent of the voting control of Comcast through special Class B shares - allowed the company to "make the tough decisions for the long haul."
In 2011, Comcast acquired majority control of NBCUniversal - the news, entertainment, theme park, and movies giant. Those 1,000 shares from 1972 were now, after splits, about 148,000 shares and worth $5.3 million. Financial writer Paul Kagan launched the "Cablecast" newsletter on the cable TV industry in 1969, calling Comcast in the early days "the little blue chip of cable stocks." "I was very impressed with the way they conducted their appearances at the New York media analysts' meetings," Kagan said recently. "They were always in command of their numbers, and they were always able to look ahead and quantify the future," he observed. "Big-league guys with minor-league numbers." Not anymore. Philadelphia Inquirer
Re "Why the U.S. has to settle for low-speed data," Column, Aug. 25. Michael Hiltzik could have noted the fact that America is among the world's leaders in broadband choice, availability and quality. The U.S. is one of two nations featuring three universally available high-speed networks. Eighty-five percent of U.S. households can access wired networks capable of 100-megabit-per-second service, while only half of Europe's homes can access even 30 Mbps. Basic services here are the second most affordable among members of the Organization for Economic Co-operation and Development. Average speeds are in the top 10 globally and rising faster than the nations ahead of us.
If American states were ranked among other nations, they would claim 10 of the 13 fastest broadband speeds in the world. And we've achieved this without the massive taxpayer subsidies that financed broadband networks in Europe and Asia. Europeans are abandoning the regulatory approach advocated by Hiltzik and law professor Susan Crawford, as has the Obama administration (and the Bush and Clinton administrations before that). - Michael K. Powell, NCTA President/CEO and former FCC Chairman Los Angeles Times
Tom Corbett's poll numbers are dismal, but the governor can breathe easy. He's virtually guaranteed re-election next year, according to the Center for the Study of Politics and Governance at the University of Minnesota's Humphrey School of Public Affairs. An analysis published via the center's Smart Politics blog revealed that in the 19 Pennsylvania gubernatorial races dating back to 1938, voters have elected a governor of the sitting president's party just once. That was in 1982, when Republican Gov. Dick Thornburgh defeated Democrat Allen Ertel while Ronald Reagan occupied the White House. So while Corbett needs to bolster his popularity in the coming months, a 75-year-old trend indicates he's a shoo-in to win a second term. Pittsburgh Tribune-Review
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