Comcast's Cash Machine: Can Epic Universe Replace Dying Cable?

Philip Hernandez (00:00.772)
Okay, from our studios this week in Los Angeles and Tampa, this is Green Tagged Theme Park in 30, where we break down the top theme park news from each week and discuss why it matters to professionals. I'm Philip and I'm joined as always by my co-host, Scott Swenson of Scott Swenson Career Development. And this week we are discussing the earnings from Comcast, the first quarter earnings and breaking down what it means for the theme park industry. Welcome back, Scott. Welcome back from your trip.

Scott (00:25.39)
Yay! Yay! Thank you! Thank you! And you just got back from a trip too. You were at East Coast Honors Convention.

Philip Hernandez (00:33.828)
I was at East Coast Honors Convention and I'm still spinning, but we'll probably get into that in unhinged.

Scott (00:40.696)
Yeah, we'll ramble about that in unhinged. Yes, I'm just glad to be back in the US, back from Saudi. I have already heard many, wonderful comments from my students, both in Riyadh and in Jeddah, about this show, as well as about the sessions that I taught. And I got a very nice email from the folks at GIA saying the response had been very positive. So I'm very proud of the work that we did there, but I am very happy to be back in the US. Very, very happy.

Philip Hernandez (01:08.91)
Excellent, and well, let's jump to our first story here, which we're looking at Comcast earnings and I wanna put it a little bit into context, but I think they basically, the Comcast earnings show a company striving to diversify from one business, which was their classic cable model to a bunch of other businesses before time runs out. So in other words, the LBE side, location-based entertainment is a growth arena insulated, it's kind of insulated from the cord cutting and streaming wars and Comcast is clearly

doubling down on that. So their Q1 revenue decreased a little bit, 0.6%, while profits also declined. But the theme park division also experienced a 5 % revenue decrease. Comcast, however, remains optimistic about future growth, particularly with Epic Universe, of course. And the stock did dip, but mainly the reason that it dipped was actually because they lost 200,000 cable broadband customers. And I think

For this show and for our audiences, we're so focused on the theme park stuff. We see the 5 % decrease and we see this kind of stuff. We wanna know more about that. But actually the reason that it had that dip was because of the broadband. And the reason is, wanna kind of put this in context, which is important. So the theme park division is roughly 6 % of Comcast, but their connectivity, the broadband is right now about 37 and a half percent.

And so that's why, because broadband is the single largest product that Comcast sells. And it accounts for over one quarter of the total revenue of the company, which is far larger than the theme parks or the films or Peacock or any of that stuff. It's just that the theme parks are more sexy and they're what we talk about. So that's why, but broadband also has higher margins. it's just, it was basically just printing money for Comcast. And so when they say,

Hey, we lost 200,000 subscribers in one quarter. I mean, that, it's significant. And I think that's really what you saw here. So basically Comcast is in, I don't wanna say like a rough spot because it is a good spot. They're in a transition, but that's why they're up here and they're saying, hey,

Scott (03:07.726)
That's significant. Yeah, that's significant.

Scott (03:21.07)
They're in a transitional phase. Let's put it that way.

Philip Hernandez (03:27.58)
Look at Epic, look at how great it is, look at how many people are talking about it, look at how incredible, and then they're talking about Horror Unleashed and they're talking about the park in Texas, because they're basically they're saying, look, we understand that this is shrinking and we are diversifying our revenue and we're really investing in this location-based entertainment and it's working because people love it and they're showing up and we're able to keep pricing power. And like this is the story and this

story is critical to them because they need to kind of convince everybody that they're moving fast enough. Because, know, if you just look at the cache and the slope, I mean, basically, it's a ticking clock. If the cable starts to rapidly decrease, then they're in a tight spot. So they kind of that's why they're so aggressive with this and they're so aggressive with the messaging. So I I want that context out there for everyone to understand.

Scott (04:24.91)
And I also think it's really important for people in the theme park and the live entertainment industry to also recognize that if it weren't for the, think about it, you said 6 % of the parks? If it weren't for the massive gorilla that is the rest of the company, Universal couldn't be as bold. We've spent a lot of time talking about how bold they're being with making these decisions about building Epic and investing in the Texas.

Philip Hernandez (04:36.314)
Yep, 6%.

Scott (04:53.006)
kids or family park or kids park investing in the Vegas horror park or horror experience. But they could never do that if they didn't have in essence Big Daddy's trust fund that is going to that it's going to help them and provide for them. You know, we look at these little independent parks who look at Universal and Disney and they go, well, my gosh, how could they ever we could never do that. We could never compete with that. And you know what? You're right. You know, you don't have 94 percent of your business.

Philip Hernandez (05:18.181)
You're right, exactly.

Scott (05:23.136)
outside of the theme park world. it is, and that's also why it's really important. And I applaud Philip for doing this because he's the one who puts together the vast majority of content that we talk about on this show. But I applaud you for doing this because I think it's important to recognize that what happens to these larger companies impacts their theme park divisions. And not only positively, but both positively and negatively, I guess, is my point. So it is essential to look at the macrocosm so that

We don't get too mired down in the minutiae. I mean, this used to be, I think back to the early days, and sorry, I'm making this antiquated reference, but I think back to the old days of Busch Gardens, and Busch Gardens was less than 1 % of the Anheuser-Busch Brewery conglomerate nation. And the whole point originally for the parks was to lose money so that they could have a tax write-off. So the whole reason Busch Entertainment Corporation was ever formed was because it started to be profitable.

as an independent microcosm. So this all makes total sense. And it's just important for everybody to recognize that when you compare a family-run park, which I don't think there are that many of anymore, but when you compare a family-run park with a park that roughly holds the same acreage as a Universal or a Disney, you can't compare them at all because they're really not even in the same industry. The fact that

what used to be their shiny glittery diamond with Comcast used to be their broadband. This is what we're talking about here and yeah, we do these theme parks too. The fact that that is shifting, even though it's never good, the theme parks are never gonna generate the kind of revenue that the broadband was generating. It's just simply not going to happen. But it's a great shiny diversion. It's a great shiny tactic to say, look how smart we are for diversification.

And diversification seems to be the word across the industry right now. So kudos to Comcast for coming out with that. I just, since Philip mentioned, let's put it in perspective. I also wanted to put it in perspective from the theme park standpoint of, you know, it's a tiny, tiny part of a really big corporation, which is why they can be riskier.

Philip Hernandez (07:37.808)
Yes, that's a great point. you know exactly that. And the amount of free cash flow they generated was five billion. So they're literally like, they got like five billion in cash they can throw at some of these concepts. And that's a lot of money. That's enough to build, you know, we're talking about horror and leech and we're talking about these, like they can build these, they can test these things with just free cash, which they don't need to get debt. And that's even with Disney.

That's a key differentiator because Disney is all about the entertainment side and they actually, they do for some of these big projects need to take on debt. And as the interest rates are going up, that debt's becoming more expensive. So it's even harder for Disney to expand rapidly because of this. Whereas Universal just has the free cashflow that they can then pump into testing. And it's not even, I mean, five billion is enough to do all this and more. I mean, it's not even.

Scott (08:30.786)
pretty much anything you want if you think about it. I know there are people listening going, five billion? Yeah, I could come up with some ways to spend five billion. Especially if there was no interest. And when you say there is no debt, mean, that is a substantial amount of money.

Philip Hernandez (08:49.2)
Yes. Yes.

Scott (08:51.522)
When you take five billion and you, I got into theater because I was told there wouldn't be any math, but you take five billion and you look at what the, just the interest payments alone are going to be. That's huge. So it's because of Comcast's significantly profitable interests that they currently own, that they can be so experimental. They can be so, appears just, if you look at just the microcosm of the theme park world,

appears to be kind of cavalier, really. You we're going to build this gigantic new park in Florida, and we're going to announce the same year that we're doing something in Vegas and in Texas and in the UK. But it's because they've got the money to do it. So why not? Why not invest now while they've got the cash to do it? It's exactly what's happening in the Middle East. It's exactly what's happening in

Philip Hernandez (09:22.064)
Yeah.

Philip Hernandez (09:34.598)
Yep. Yep.

Philip Hernandez (09:40.976)
And I was gonna, I was just gonna say that it was exactly like what's going on in Saudi, right? Where you have, you have a cash cow and they have that generated, but they know eventually it's gonna run out. And so they are doing a strategic plan to diversify now. And even if it takes losses for a decade, it's okay to have the attendance because they need the capacity available for when they transition into a different business model. Yeah.

Scott (10:05.528)
Correct. And they need to have that business model set up while they still have money pouring in from a different source. So get it set up now where you've got the cash to invest in it. And that way, as one goes down, one can go up and there's never a point of loss.

Philip Hernandez (10:22.746)
Yeah, I always think it's a little funny. You see, especially now this week with the epic opening date looming, we've seen a lot of mainstream articles and a lot of people that aren't in our industry, they're talking about Disney versus Universal and all this back and forth. And I'm like, this is kind of funny because they want different things from it. They're not really coming at it from the same direction. And it's great that

Universal is creating. course, they're trying to make their stuff better and everything. again, it's the same thing. They're not, I guess it's okay if they fail a little bit and it's less okay if Disney fails. They almost like can't fail because they're under a microscope and because of the debt, everything has to make more sense. And here they can do a little test project in Texas and see how it does and learn from it and test in Vegas and learn from it and do all these things and it's okay.

Scott (11:16.902)
And for most people, a little test project is, we'll open a new food and beverage location in our park. But for Comcast, it's, yeah, we'll do a little test thing where we open a family park in Texas where we buy a bunch of land and open a park that may or may not work.

Philip Hernandez (11:32.602)
Yeah, exactly, exactly. Well, let's talk about, since of course this is a theme park podcast, we're gonna talk about the theme park division specifically. As I mentioned, the top of the show, the revenue drop was about 5%, but it was expected due to these two things we've been talking about. One, of course, is that there was revenge travel in previous years, and that's kind of like naturally dipping. So that's equalization, which they kind of pointed to. But there was also some one-time factors that

were happening in, of course, the Los Angeles wildfires. mean, that really, the park in Hollywood had to close down for a few days, so it really disrupted business there. Right, and so the only thing I would call issue on is that they say it's like one time, but we've talked about how it's not gonna be.

Scott (12:13.558)
and the back-to-back hurricanes here in Florida.

Scott (12:23.47)
Yes, because there's never going to be another wildfire in California and there's never going to be another hurricane in Florida.

Philip Hernandez (12:28.508)
Right, exactly. That's the thing that I was like, even still, they're all trying to downplay that, oh, it's just happened once and we're, but you know what? mean, Wall Street seems to be buying it. mean, most of the analysts believe.

Scott (12:39.65)
don't live in California or Florida. So they don't understand that this is a regular occurrence.

Philip Hernandez (12:43.932)
Yeah, that's true. They're all in New York, right? But they don't understand. Like, yeah, they are, they mostly believe, you know, this whole narrative that Epic Universe excitement is strong and, you know, bookings are going to drive acceleration in the park growth at least through 2025, you know, and it, you know, it's broad acknowledgement that Epic is a game changer that could significantly boost their EBITDA and all that kind of stuff. But, and just also for perspective here, you know, the division as a whole, their theme park section,

generated 3 billion Aviva in last year in 2024. And it was only a billion just a decade ago. And so, I mean, the growth, I mean, you can see the growth. mean, so it's clear, it's a clear growth pattern, just to essentially encapsulate what they're trying to do here, they're basically, trying to, right now they know this first year there's gonna be losses, do the opening expenses and all that. And so you see the Aviva shrinking and the theme park division a little bit, but again, they still have the cash to offset it.

And of course their plan is to grow it. And even if they just grow like one point or whatever, then it adds right to the top line. And so I think their goal is to get it up to 10 % from six point whatever, point four up to 10 in the next year or so of contributing. And of course the gamble here, so what Universal is trying to say is that this demand

is so strong because Epic and it's, you all this kind of stuff. But the gamble is that what happens at the end of 2025 or 2026, if the numbers aren't as strong and you're, they're not able to push it to that 10 % marker they're trying to that's, that's, that's kind of the, the caution. And it may not even be of their own fault. It could be weather. It could be also macro economic trends. It could be traveled trends. mean, there's a lot of factors that it could be.

Scott (14:38.286)
Well, and I think that's why at least at least locally because I've had you know I've had tons and tons and tons of colleagues and friends who have experienced epic universe pre-opening Because they've been they've been beta testing. They've been employee testing. They've been soon pass holder testing and They have been slowly loosening their control over what is being seen of the park and more and more is being seen and

what it looks like to me is that they're really doubling down on quality. That they're trying to get the word out that this is something that you have never seen before. This is truly, every pun intended, I guess, this is truly of epic proportion. This is something that you're not gonna get a chance to experience anywhere else in the world. And their control over the narrative, I think has been exceptional.

Philip Hernandez (15:08.528)
Yes.

Scott (15:30.882)
because it's always focused, each week there's one more thing that they seem to let people release. the fact that there have been very, I'm sure if you dig, you'll find them, but they sort of have focused on specific areas at specific times so that it just keeps expanding and expanding and expanding. It's very cinematic in the way things are being revealed. And there are,

I mean, for example, there are already people who, because they sold out of certain merchandise items, like for example, the Danny Elfman soundtrack to the Monsters section.

the fact that it's no longer on sale until the actual opening again, because they had to reorder and reprint. And this is on vinyl. This isn't even a download situation where there is no limited access. This is a limited quantity something something on vinyl that everybody seems to want. So it's...

It's interesting that they are their narrative right now is top quality, best you're going to see.

hands down, better than anything else, so that when it comes to the end of the year, beginning of 26, there are still people who haven't been able to make that travel plans, make those travel plans to get here, either because they haven't been able to get a reservation at the hotel, or they haven't been able to get tickets or whatever, so that it will help sustain that wave of new and exciting.

Philip Hernandez (17:08.026)
Yeah. Well, exactly what you're saying. I think it there's a strategy behind it. I mean, clearly they're trying for quality and I think they're trying for quality because they want pricing power because you can see that Disney has been able and we just talked about last week, the idea of the barbell where you have you have the budget and you have the luxury and clearly Disney is aiming for luxury. And the question is, is Universal also aiming for luxury or are they?

trying to create something that is perceived as value of Disney, like quality, I guess quality of Disney, but at a more budget price, or are they gonna eventually aim to be the same luxury pricing as Disney?

Scott (17:51.074)
The vibe I'm getting is the same quality, and I don't think they're really talking about pricing. I think they're more talking about accessibility, which I realize pricing is a part of that. I think they are, and maybe it's just my own perception, I don't know, but they appear to be leaning into the thing that frustrates me about Disney, and that is ease of accessibility. The fact that they're now building,

you know, their new park has a hotel, which is expensive as hell, that has a new hotel that has its own direct access to the park. Now, granted, they have that in California as well. But it's... I mean, Disney does, sorry. Disney has it in California. But it's just interesting to me that they are just in their marketing speak, their marketing language, their visuals.

makes things seem so much easier. I really think, especially in Florida, that's what they're leaning into. At least that's my perception. could be wrong, but that's what I'm seeing.

Philip Hernandez (18:57.116)
I would agree. think it's probably a combination of multiple items where it's all aimed at the idea of putting the universal at the same quality of Disney, but making it more accessible, whether that's through ease of no reservations or that's through price where you can actually afford to take your family, you know, and you could do a whole week for cheaper and have the same quality of experience. you know, if you just look at some of the numbers, I think some of this is in there.

So attendance was we said was down, but revenue only fell about 5 % basically implying that the guest spending stayed strong, like spending per guest is wrong because basically otherwise the revenue would have fell sharper, right? basically they have pricing power and they did raise prices, but they didn't see that much of a pushback. maybe who's to know, maybe they'll keep, I don't know if they'll keep rising, keep rising up or whatnot, but

Regardless, it seems like the strategy, whether it's, I'm sure it's intentional or not, but whatever, but it seems like they're getting to pricing power, right?

Scott (20:02.392)
Yeah, yeah, yeah. the thing, you they are universal is well, at the least on par with Disney when it comes to their merchandise offerings. Some would say they are actually even passing them when it comes to their merchandise opportunities. But again, it's tough when you see people spending, you know,

Philip Hernandez (20:15.044)
Yes.

Philip Hernandez (20:20.646)
I would say.

Scott (20:27.288)
quite a bit of money to build a lightsaber, but you also see people spending quite a bit of money, or the popcorn buckets, but you also see people on the flip side spending, I would say, probably just as much to get a wand. there's, that's, think, you when it comes to, when it comes, when we talk about attendance maybe down, but revenue is still holding relatively strong, or is not dropping at the same level as attendance.

Philip Hernandez (20:29.83)
or the popcorn bucket.

Philip Hernandez (20:54.246)
Yep. Yep.

Scott (20:55.192)
To me, that leans into all of the in-park up-sale opportunities. So whether that's merchandise or culinary or tours or whatever, the makeup experiences, Yep.

Philip Hernandez (21:02.982)
You know, the makeup experience in dark, know, that everyone's loving that, you know, when you hear about it. mean, you're right. mean, again, but that's all pricing power. mean, they've been very strategic and smart starting again with Harry Potter. Like you always say, that was like the aha moment. Yep. And now that you've seen that again and again, and, so we talked last week about United Airlines and we talked about that decrease in

Scott (21:16.465)
That was a turning point. That was a turning point for them.

Philip Hernandez (21:29.34)
domestic, but kind of a softening domestic market and their decrease of supply for that. So Comcast was actually asked specifically about that. I'm not taking credit for that or anything, of course, but I'm just saying it might be a coincidence.

Scott (21:43.566)
I'm so lucky to have such a smart co-host, Philip. Good job.

Philip Hernandez (21:47.612)
Thank you so much. It means so much to me. they were asked specifically about that. And I'm just going to read the exact statement here from them. So Comcast, said, the CEO said, our first quarter results continue to be stable in Florida. We had pre-opening expenses for Epic Universe, but excluding that, underlying trends stable in Orlando.

What we're seeing for advanced bookings for both ticket sales and hotel bookings are strong for the overall parks and for Epic. While I see the same headlines you're seeing about airlines and the like, some of that might be outside of the window of our booking and what we're seeing continues to be tracking well. To your point, some of that is definitely related to the excitement about Epic without a doubt for which reviews and pre-opening buzz is very strong. And again, ticket sales and advanced plans are a little ahead of our expectations.

Right now, what we see is continued steadiness for our backdrop of parks. Our domestic parks do draw a lot of folks from the US and a lot of folks from markets in the South and in the case of Florida that are not necessarily hopping on planes to get there. So there may be a delayed effect between what the airlines are starting to report on and what we see. But like I said, no real sign of that in our business as we sit here now. In LA, it's all about getting LA back to having the tourism industry broadly recovered after the wildfires.

I think the whole market is continuing to see people staying away a little bit more than I think leadership of LA broadly, or as a parts-oriented market would like it to be. That's domestic parks. International trends for Japan and Beijing are stable as well. I think his response says it all. And I think a lot of people took that and just left it and walked away. But I feel like if you read a little bit more into it, it's almost exactly what we've been talking about. So he didn't say, right,

It's like he said what we're seeing in our booking windows. So they're basically like our bookings were more than we thought. And if you look at our booking windows, it's strong. Okay. But if it was so strong, why are they cutting entertainment before they opened? Right. I mean, I I think it's just like all the analysts were saying, it's still possible that as you get, I mean, we're, this is a trailing indicator is my point. This is a trailing indicator by the end of this year or next year.

Philip Hernandez (24:07.352)
if conditions worsen, it is still possible for it to get worse. And he's saying, like, he's acknowledging that. He's like, our booking windows are strong. Could it change? Yes. And I think that's fine. You know, I think that's what we've been saying is that it could get worse, it could not. We've also said that Disney and Universal are, like we just talked about, they're value, I mean, this is a great value experiences. So you may not be dissuaded from that.

going to them if you already had your heart set on them, but maybe you won't go to your local park instead. You'll make your five-year trip now and then you'll delay it. So we've said all these and then when he talks about international things, that's also a huge thing. mean, of course they're building a whole park internationally and he's like, they're stable, which is another way of saying, right, like they're stable in contrast to the US, which is unstable.

Right? So everything we've talked about, think is in the statement, you know, and them referencing that they have an international portfolio that can continue to be strong, even if there's instability in the US, you know, and then saying it's strong now and we'll see what happens basically is what they're going. But need I remind you yet again, five billion in free cashflow. So even if the domestic market softens, they have the cash to...

to make sure they're gonna keep the employed staff and all that. And then he did mention the planes, literally, you know, saying the bookings are all coming from people that are just driving there. So what happens when all those people have their visit? Are they gonna come back? He doesn't know and we don't know. And if everyone decides to keep going to Epic, it'll be great if they decide not to go. And if international tourism drops, it might be a problem, but they have cash in the bank.

Scott (25:52.589)
Well, and it's interesting because I think that when we look at stories like this and when we talk about whether it's quarterly review or whatever the event is, we live in the United States in a world of pass fail. We only want to hear things are exceptionally good or exceptionally bad. if it's not, we're good. We're OK. We're standard.

Philip Hernandez (26:22.256)
Yeah.

Scott (26:22.382)
It goes back to one of the most, one of my mentors when I was still working in the parks, used the phrase and it has stuck with me because it is so true and it's true in pretty much every industry, but especially, especially the theme park industry. And that is things are never as good or as bad as we make them out to be. So a statement like this, which appears to be, he's positioned it in a very positive way, but what, as you say, Philip, what he's saying is very much middle of the road. What he's saying is,

Philip Hernandez (26:50.906)
Yeah, exactly.

Scott (26:51.918)
we're okay. And we are not, we are so used to the sensationalizing of information, especially in the US, that okay is never good enough. It's like, no, we've got to be stellar and we have to be, you know, expecting a 500 % return on our investment and we have to, you know. So to me, this is one of the most logical statements we've heard in a long time.

Philip Hernandez (27:19.228)
I

Scott (27:19.914)
about any of the quarter reviews that we've talked about. It's like right now we're OK. If you look at this window, life is good. It could get better. It could get worse. That's true. And quite honestly, that's true no matter what the big CEOs say in their statements, because I realize their job is to, you know, bolster the stockholders. I get it. I get it.

But at the same time, I think we need to start changing our perspective a little bit and recognizing, because when they bolster the stockholders, they're either using language that is deceptive or they really, I mean, sometimes they really are having great years, but it's okay to be okay. It's okay to be cautiously optimistic. There's nothing wrong with that. And in fact, that's probably a good long-term business strategy.

Philip Hernandez (28:09.338)
Yep. Yep. I agree.

Scott (28:09.71)
So, you know, I applaud this statement and I'm really glad that you read it because I think it makes total sense in the fact that here's where we stand, we look like we're in good shape, because he never once denied any of the accusations in the question. He said those are all real.

Philip Hernandez (28:27.3)
That, see, that's exactly, so I feel like the people that covered this story didn't talk about that, but he didn't go there and say, we're not saying, I mean, he basically, he was like, a lot of locals are showing up. So he didn't deny the dip in international tourism, right? He just, instead he said locals are coming.

Scott (28:48.814)
Well, that is 100 % true right now simply because it's only open to locals, really. mean, you know, there's not a whole lot of friends and family that are schlepping in from across the world to come to the park. So he never denied it. It's masterful, I think, in the way that he handled it. I also think it is honest. And I also think that it is

Philip Hernandez (28:53.548)
of... Yep, yep.

Philip Hernandez (29:03.856)
Yep. Yep.

Philip Hernandez (29:09.562)
was really good, yep.

Scott (29:16.606)
optimistically stable. You know, one of the things that I think would help us all is to try to be a little bit more optimistically stable in pretty much anything we talk about in our lives. Things are never going to be as good or as bad as we want to make them out to be. So kudos. I like that. I like that.

Philip Hernandez (29:36.326)
Yeah, well, we're just about out of time, Scott.

Scott (29:39.224)
You're right. We are about out of time. Well, hopefully, you know, we've got a whole rant to go on in Unhinged. So if you're going to join us for that, please do, because, you know, Philip and I may scream and yell at each other, but I doubt it, because we usually agree. Anyway, if you're not, thank you for spending some time with us this week. We always appreciate your listenership. And please tell your friends if you think it's something that is valuable to them. We are getting a...

more and more international listeners and viewers, which I really appreciate. so until next week, on behalf of Philip Hernandez, this is Scott Swenson from Green Tag Theme Park in 30, and we will see you next week.