Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to and should be read in conjunction with the consolidated financial statements and related notes to enhance the understanding of our operations and our present business environment. Components of the management’s discussion and analysis of financial condition and results of operations section include:

•	Overview

•	Results of Operations

•	Non-GAAP Financial Measure

•	Liquidity and Capital Resources

•	Contractual Obligations

•	Off-Balance Sheet Arrangements

•	Recent Accounting Pronouncements

•	Critical Accounting Judgments and Estimates

Overview

We are a global media and technology company with three primary businesses: Comcast Cable, NBCUniversal and Sky. We present our operations for (1) Comcast Cable in one reportable business segment, referred to as Cable Communications; (2) NBCUniversal in four reportable business segments: Cable Networks, Broadcast Television, Filmed Entertainment and Theme Parks (collectively, the “NBCUniversal segments”); and (3) Sky in one reportable business segment. In the fourth quarter of 2018, we acquired a 100% interest in Sky through a series of transactions, and Sky’s results of operations for the period October 9, 2018 to December 31, 2018 are included in our consolidated results of operations. For more information about our company’s operations, see Item 1: Business.

We adopted the updated accounting guidance related to revenue recognition on January 1, 2018 on a full retrospective basis, which required us to reflect the impact of the updated guidance for all periods presented (see Note 9 to Comcast’s consolidated financial statements and Note 8 to NBCUniversal’s consolidated financial statements).

Consolidated Revenue, Net Income Attributable to Comcast Corporation and Adjusted EBITDA(a)
(in billions)

	Revenue		Net Income Attributable to Comcast Corporation		Adjusted EBITDA

	34	Comcast 2018 Annual Report on Form 10-K

(a)	Adjusted EBITDA is a financial measure that is not defined by generally accepted accounting principles in the United States (“GAAP”). Refer to the “Non-GAAP Financial Measure” section on page 54 for additional information, including our definition and our use of Adjusted EBITDA, and for a reconciliation from net income attributable to Comcast Corporation to Adjusted EBITDA.

2018 Developments

The following are the more significant developments in our businesses during 2018:

Cable Communications Segment

•	An increase in revenue of 3.9% to $55.1 billion was primarily driven by increases in high-speed internet, business services and advertising revenue, partially offset by a decline in video and voice revenue

•	An increase in Adjusted EBITDA of 6.5% to $22.4 billion

•	An increase in operating margin from 39.7% to 40.7% that reflects increases in revenue from high-speed internet and business services, partially offset by higher programming expenses

•	A decrease in capital expenditures of 3.0% to $7.7 billion that reflects:

◦	decreased spending on customer premise equipment and support capital

◦	an increase in investments in scalable infrastructure to increase network capacity

◦	an increase in investments in line extensions, primarily for the expansion of our business services

NBCUniversal Segments

•	An increase in total NBCUniversal revenue of 8.9% to $35.8 billion and an increase in total NBCUniversal Adjusted EBITDA of 4.6% to $8.6 billion, including the impact of our broadcasts of the 2018 PyeongChang Olympics and 2018 Super Bowl

•

An increase in Cable Networks and Broadcast Television segments revenue of 12.2% and 19.6%, respectively, including the impact of our broadcasts of the 2018 PyeongChang Olympics and 2018 Super Bowl; excluding revenue associated with our broadcasts of the 2018 PyeongChang Olympics and the 2018 Super Bowl, revenue in our Cable Networks and Broadcast Television segments increased 8.6% and 7.1%, respectively, primarily due to increases in distribution revenue

•	A decrease in Filmed Entertainment segment revenue of 5.8% reflecting lower home entertainment, theatrical, other and content licensing revenue

•	An increase in Theme Parks segment revenue of 4.4% reflecting higher guest spending, driven by increased ticket prices and merchandise, food and beverage spend, partially offset by the impact of inclement weather conditions and natural disasters in Japan

Sky Segment

•	We acquired Sky in the fourth quarter of 2018 through a series of transactions with total cash consideration of £30.2 billion (approximately $39.4 billion using the exchange rates on the purchase dates)

•	For the period October 9, 2018 to December 31, 2018, Sky’s total revenue was $4.6 billion and Adjusted EBITDA was $692 million

Corporate and Other

•	An increase in Corporate and Other revenue of 17.5% to $1.4 billion primarily due to revenue associated with our wireless phone service

•	An increase in Adjusted EBITDA losses of 12.6% to $1.5 billion primarily due to losses associated with our wireless phone service of $743 million

•	Cash capital contributions to Atairos totaling $282 million; as of December 31, 2018, our total investment in Atairos is $2.7 billion

•	An effective tax rate of 22.2% and a reduction in income tax payments of $824 million primarily due to federal income tax overpayments related to the 2017 tax year that were applied to reduce tax payments in the current year, as well as a reduction in the federal income tax rate from 35% to 21%, effective January 1, 2018

Comcast 2018 Annual Report on Form 10-K	35

Competition

The results of operations of our reportable business segments are affected by competition, as all of our businesses operate in intensely competitive, consumer-driven and rapidly changing environments and compete with a growing number of companies that provide a broad range of communications products and services, and entertainment, news and information products and services to consumers. Technological changes are further intensifying and complicating the competitive landscape and challenging existing business models. In particular, consumers are increasingly turning to online sources for viewing and purchasing content, which has and likely will continue to reduce the number of our video customers and subscribers to our cable networks even as it makes our high-speed internet services more valuable to consumers. In addition, the increasing number of entertainment choices available has intensified audience fragmentation, which has and likely will continue to adversely affect the audience ratings of our cable networks and broadcast television programming.

For additional information on the competition our businesses face, see Item 1: Business and Item 1A: Risk Factors. Within the Business section, refer to the “Competition” discussion, and within the Risk Factors section, refer to the risk factors entitled “Our businesses currently face a wide range of competition, and our businesses and results of operations could be adversely affected if we do not compete effectively” and “Changes in consumer behavior driven by online video distribution platforms for viewing content could adversely affect our businesses and challenge existing business models.”

Seasonality and Cyclicality

Each of our businesses is subject to seasonal and cyclical variations. See Item 1: Business and refer to the “Seasonality and Cyclicality” discussion within that section for additional information.

Consolidated Operating Results

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Revenue	$	94,507		$	85,029		$	80,736		11.1	%	5.3	%
Costs and Expenses:
Programming and production	29,692			25,355			24,348			17.1		4.1
Other operating and administrative	28,094			25,449			23,840			10.4		6.7
Advertising, marketing and promotion	7,036			6,519			6,291			7.9		3.6
Depreciation	8,281			7,914			7,464			4.6		6.0
Amortization	2,736			2,216			1,962			23.5		12.9
Other operating gains	(341		)	(442		)	—			NM		NM
Operating income	19,009			18,018			16,831			5.5		7.1
Interest expense	(3,542		)	(3,086		)	(2,942		)	14.8		4.9
Investment and other income (loss), net	(225		)	421			437			(153.4	)	(3.5	)
Income before income taxes	15,242			15,353			14,326			(0.7	)	7.2
Income tax (expense) benefit	(3,380		)	7,569			(5,298		)	(144.7	)	NM
Net income	11,862			22,922			9,028			(48.2	)	153.9
Less: Net income attributable to noncontrolling interests and redeemable subsidiary preferred stock	131			187			350			(29.8	)	(46.5	)
Net income attributable to Comcast Corporation	$	11,731		$	22,735		$	8,678		(48.4	)%	162.0	%
Adjusted EBITDA(a)	$	30,165		$	27,956		$	26,257		7.9	%	6.5	%

All percentages are calculated based on actual amounts. Minor differences may exist due to rounding.

Percentage changes that are considered not meaningful are denoted with NM.

(a)	Adjusted EBITDA is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measure” section on page 54 for additional information, including our definition and our use of Adjusted EBITDA, and for a reconciliation from net income attributable to Comcast Corporation to Adjusted EBITDA.

	36	Comcast 2018 Annual Report on Form 10-K

Consolidated Revenue

The following graph illustrates the contributions to the increases in consolidated revenue made by our Cable Communications, NBCUniversal and Sky segments, as well as by Corporate and Other activities including eliminations.

The primary drivers of the changes in revenue were as follows:

2018

•	Growth in our Cable Communications segment driven by revenue from residential high-speed internet, business services and advertising

•	Our broadcasts of the 2018 PyeongChang Olympics and 2018 Super Bowl generated $1.6 billion of revenue, which was reported in our Cable Networks and Broadcast Television segments

•	Sky contributed $4.6 billion of revenue from October 9, 2018 to December 31, 2018

2017

•	Growth in our Cable Communications segment driven by revenue from residential high-speed internet and video services and business services

•	Growth in our NBCUniversal segments driven by Filmed Entertainment and Theme Parks, partially offset by revenue in 2016 associated with our broadcast of the 2016 Rio Olympics

Revenue for our segments is discussed separately below under the heading “Segment Operating Results.” Revenue for our business development initiatives and other businesses is discussed separately under the heading “Corporate and Other Results of Operations.”

Comcast 2018 Annual Report on Form 10-K	37

Consolidated Costs and Expenses

The following graph illustrates the contributions to the increases in consolidated operating costs and expenses, representing total costs and expenses excluding depreciation and amortization expense and other operating gains, made by our Cable Communications, NBCUniversal and Sky segments, as well as by Corporate and Other activities including eliminations.

The primary drivers of the changes in operating costs and expenses were as follows:

2018

•	Increase in programming expenses in our Cable Communications segment

•	Increase in programming and production expenses in our NBCUniversal segments due to our broadcasts of the 2018 PyeongChang Olympics and 2018 Super Bowl

•	Operating costs and expenses for Sky for the period October 9, 2018 to December 31, 2018 were $3.9 billion

•	Increase in Corporate and Other activities driven by our wireless phone service

2017

•	Increase in programming expenses in our Cable Communications segment

•	Increase in programming and production expenses in our Filmed Entertainment segment, partially offset by expenses in 2016 associated with our broadcast of the 2016 Rio Olympics

•	Increase in Corporate and Other activities driven by the launch of our wireless phone service

Operating costs and expenses for our segments is discussed separately below under the heading “Segment Operating Results.” Operating costs and expenses for our corporate operations, business development initiatives and other businesses is discussed separately below under the heading “Corporate and Other Results of Operations.”

Consolidated Depreciation and Amortization Expense
Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Cable Communications	$	8,264		$	8,006		$	7,538		3.2	%	6.2	%
NBCUniversal	2,108			2,041			1,805			3.3		13.1
Sky	539			—			—			NM		NM
Corporate and Other	106			83			83			26.9		(0.5	)
Comcast Consolidated	$	11,017		$	10,130		$	9,426		8.8	%	7.5	%

Consolidated depreciation and amortization expense increased in 2018 and 2017 primarily due to the acquisition of Sky in the current year period and increases in capital expenditures, as well as expenditures for software, in our Cable Communications segment in recent years. Capital expenditures increased in our Cable Communications segment as we continue to invest in network capacity and in customer premise equipment, primarily for our X1 platform, cloud DVR technology and wireless gateways. Certain assets in our Cable Communications segment have relatively short estimated useful lives, which also contributed to the increase in depreciation expense in 2018 and 2017 and will continue to increase depreciation expense in 2019. NBCUniversal depreciation and amortization expense also increased primarily due to our continued investment in new attractions in our Theme Parks segment,

	38	Comcast 2018 Annual Report on Form 10-K

including for Universal Studios Japan. Sky depreciation and amortization expense is related primarily to property and equipment and customer relationship intangible assets.

Amortization expense from acquisition-related intangible assets, such as customer relationships, totaled $1.1 billion, $824 million and $790 million for 2018, 2017 and 2016, respectively. Amounts primarily relate to customer relationship intangible assets recorded in connection with the NBCUniversal transaction in 2011, and 2018 included $267 million related to our preliminary estimates of Sky customer relationship intangible assets for the period October 9, 2018 to December 31, 2018. Amounts related to Sky are estimates and subject to change as we finalize acquisition accounting (see Note 8 to Comcast’s consolidated financial statements for additional information).

Consolidated Other Operating Gains

Consolidated other operating gains for 2018 included $200 million related to the sale of a controlling interest in our arena management-related businesses in Corporate and other and $141 million related to the sale of a business in our Filmed Entertainment segment (see Note 10 to Comcast’s consolidated financial statements). Consolidated other operating gains for 2017 included $337 million related to NBCUniversal’s relinquishment of spectrum rights (see Note 8 to Comcast’s consolidated financial statements and Note 7 to NBCUniversal’s consolidated financial statements) and $105 million related to the sale of a business in Corporate and other (see Note 10 to Comcast’s consolidated financial statements).

Consolidated Interest Expense

Interest expense increased in 2018 primarily due to higher levels of debt outstanding and financing costs resulting from the Sky transaction. Interest expense increased in 2017 primarily due to higher levels of debt outstanding.

Consolidated Investment and Other Income (Loss), Net

Year ended December 31 (in millions)	2018			2017			2016
Equity in net income (losses) of investees, net	$	(364	)	$	107		$	(104	)
Realized and unrealized gains (losses) on equity securities, net	(187		)	(17		)	12
Other income (loss), net	326			331			529
Total investment and other income (loss), net	$	(225	)	$	421		$	437

Equity in Net Income (Losses) of Investees, Net

The changes in equity in net income (losses) of investees, net in 2018 and 2017 were primarily due to our equity method investments in Atairos Group, Inc. and Hulu, LLC. Atairos, which commenced operations in 2016, follows investment company accounting and records its investments at their fair values each reporting period with the net gains or losses reflected in its statement of income. We recognize our share of these gains and losses in equity in net income (losses) of investees, net. The losses at Hulu were driven by its higher programming, advertising and marketing costs, and higher other administrative expenses. The table below summarizes the equity in net income (losses) of Atairos and Hulu in 2018, 2017 and 2016.

Year ended December 31 (in millions)	2018			2017			2016
Atairos	$	(31	)	$	281		$	(38	)
Hulu	$	(454	)	$	(276	)	$	(168	)

Realized and Unrealized Gains (Losses) on Equity Securities, Net

The change in realized and unrealized gains (losses) on equity securities, net for 2018 compared to 2017 was primarily due to the adoption of updated accounting guidance for our marketable equity securities, which primarily relates to our investment in Snap (see Note 10 to Comcast’s consolidated financial statements and Note 9 to NBCUniversal’s consolidated financial statements).

Other Income (Loss), Net

Other income (loss), net for 2018 and 2017 primarily included interest and dividend income.

Other income (loss), net for 2016 included $225 million recognized in connection with the settlement of amounts owed to us under an agency agreement that had provided for, among other things, Verizon Wireless’ sale of our cable services and $108 million related to the sale of our investment in The Weather Channel’s product and technology business to IBM.

Comcast 2018 Annual Report on Form 10-K	39

Consolidated Income Tax (Expense) Benefit

Income tax (expense) benefit reflects an effective income tax rate that differs from the federal statutory rate primarily due to state and foreign income taxes and adjustments associated with uncertain tax positions. Our effective income tax rate in 2018 was 22.2%, which included the effects of the 2017 Tax Act and also an income tax benefit of $128 million recognized during the first quarter of 2018 related to the enactment of additional federal tax legislation in 2018, which were partially offset by higher taxable income from operations and $148 million of income tax expense due to state and federal tax law changes that were enacted in the third quarter of 2018. The 2017 Tax Act, among other things, reduced the federal corporate income tax rate to 21% from 35%, effective January 1, 2018. We recognized an income tax benefit of $244 million during the fourth quarter of 2018 related to a reduction of our net deferred tax liability as a result of the acquisition of Sky. See Note 5 to Comcast’s consolidated financial statements for further discussion on tax reform.

Our effective income tax rate in 2017 was a benefit of 49.3%. The enactment of the 2017 Tax Act resulted in a net income tax benefit of $12.7 billion in 2017, primarily related to a reduction of our net deferred tax liability. Excluding this tax benefit, our effective income tax rate in 2017 would have been an expense of 33.3%.

Additionally, in 2017, we prospectively adopted certain provisions of the new accounting guidance related to share-based compensation, which resulted in an increase in income tax benefit of $297 million in 2017. Our income tax benefit also increased $121 million due to the impact of an internal legal reorganization in the third quarter of 2017, which was partially offset by a decrease of $53 million due to changes in state tax laws. Our effective income tax rate in 2016 was an expense of 37.0%.

Consolidated Net Income Attributable to Noncontrolling Interests and Redeemable Subsidiary Preferred Stock

The decrease in net income attributable to noncontrolling interests and redeemable subsidiary preferred stock in 2018 was primarily due to the noncontrolling interest holders’ share of the loss related to Universal Beijing Resort. In 2018, we entered into an agreement with a consortium of Chinese state-owned companies to build and operate a Universal theme park and resort in Beijing, China and obtained a 30% interest in Universal Beijing Resort. See Note 8 to Comcast’s consolidated financial statements for further discussion on noncontrolling interest related to Universal Beijing Resort. The decrease in net income attributable to noncontrolling interests and redeemable subsidiary preferred stock in 2017 was primarily due to our acquisition of the remaining interests in Universal Studios Japan that we did not already own in April 2017.

Segment Operating Results

Our segment operating results are presented based on how we assess operating performance and internally report financial information. We use Adjusted EBITDA as the measure of profit or loss for our operating segments. Adjusted EBITDA is defined as net income attributable to Comcast Corporation before net income (loss) attributable to noncontrolling interests and redeemable subsidiary preferred stock, income tax benefit (expense), investment and other income (loss), net, interest expense, depreciation and amortization expense, and other operating gains and losses (such as impairment charges related to fixed and intangible assets and gains or losses on the sale of long-lived assets), if any. From time to time we may exclude from Adjusted EBITDA the impact of certain events, gains, losses or other charges (such as significant legal settlements) that affect the period-to-period comparability of our operating performance. Adjusted EBITDA for our segments is not a non-GAAP financial measure. We reconcile the aggregate amount of Adjusted EBITDA for our reportable business segments to consolidated income before income taxes in the notes to our consolidated financial statements (see Note 2 to Comcast’s consolidated financial statements and NBCUniversal’s consolidated financial statements).

To be consistent with our current management reporting presentation, certain 2017 and 2016 operating results were reclassified within the Cable Communications segment and certain 2018, 2017 and 2016 operating results were reclassified related to certain NBCUniversal businesses now presented in the Sky segment.

	40	Comcast 2018 Annual Report on Form 10-K

Cable Communications Segment Results of Operations

Revenue and Adjusted EBITDA		Residential Customer Relationships
(in billions)		(in millions)

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Revenue
Residential:
High-speed internet	$	17,144		$	15,681		$	14,421		9.3	%	8.7	%
Video	22,455			22,874			22,204			(1.8	)	3.0
Voice	3,960			4,090			4,159			(3.2	)	(1.7	)
Business services	7,129			6,437			5,705			10.7		12.8
Advertising	2,795			2,450			2,626			14.1		(6.7	)
Other	1,660			1,538			1,462			7.9		5.2
Total revenue	55,143			53,070			50,577			3.9		4.9
Operating costs and expenses
Programming	13,249			12,907			11,576			2.7		11.5
Technical and product support	6,530			6,293			6,207			3.8		1.4
Customer service	2,386			2,448			2,481			(2.6	)	(1.3	)
Advertising, marketing and promotion	3,747			3,711			3,674			1.0		1.0
Franchise and other regulatory fees	1,566			1,589			1,550			(1.5	)	2.5
Other	5,218			5,054			5,075			3.2		(0.4	)
Total operating costs and expenses	32,696			32,002			30,563			2.2		4.7
Adjusted EBITDA	$	22,447		$	21,068		$	20,014		6.5	%	5.3	%

Comcast 2018 Annual Report on Form 10-K	41

Customer Metrics
	Total Customers									Net Additional Customers
(in thousands, except per customer amounts)	2018			2017			2016			2018		2017		2016
Customer relationships
Residential customer relationships	28,046			27,168			26,533			878		635		705
Business services customer relationships	2,303			2,179			2,044			123		135		157
Total customer relationships	30,349			29,347			28,577			1,002		770		862
Average monthly total revenue per customer relationship	$	153.95		$	152.70		$	149.75
Average monthly Adjusted EBITDA per customer relationship	$	62.67		$	60.62		$	59.26
Residential customer relationships mix
Single product customers	9,074			8,196			7,756			878		439		110
Double product customers	9,092			9,056			8,797			36		259		319
Triple and quad product customers	9,880			9,916			9,980			(36	)	(64	)	277
High-speed internet
Residential customers	25,097			23,863			22,827			1,234		1,036		1,218
Business services customers	2,125			2,006			1,874			120		132		155
Total high-speed internet customers	27,222			25,869			24,701			1,353		1,168		1,373
Video
Residential customers	20,959			21,303			21,488			(344	)	(186	)	103
Business services customers	1,027			1,054			1,019			(27	)	35		57
Total video customers	21,986			22,357			22,508			(370	)	(151	)	161
Voice
Residential customers	10,153			10,316			10,546			(163	)	(231	)	110
Business services customers	1,297			1,236			1,140			60		96		101
Total voice customers	11,449			11,552			11,687			(103	)	(135	)	211
Security and automation
Security and automation customers	1,317			1,131			891			186		239		279

Customer metrics are presented based on actual amounts. Minor differences may exist due to rounding. For multiple dwelling units (“MDUs”), including buildings located on college campuses, whose residents have the ability to receive additional cable services, such as additional programming choices or our high-definition video (“HD”) or digital video recorder (“DVR”) advanced services, we count and report customers based on the number of potential billable relationships within each MDU. For MDUs whose residents are not able to receive additional cable services, the MDU is counted as a single customer. In 2017, we began to offer prepaid services that allow customers to prepay for at least 30 days of service. Residential high-speed internet and video customers as of December 31, 2018 included prepaid customers totaling approximately 135,000 and 5,000, respectively. Customer relationships represent the number of residential and business customers that subscribe to at least one of our cable services. Single product, double product, and triple and quad product customers represent residential customers that subscribe to one, two, or three and four of our cable services, respectively.

Average monthly total revenue per customer relationship for 2018 and 2017 was $153.95 and $152.70, respectively. This metric is impacted by rate adjustments and changes in the types and levels of services received by our residential and business services customers, as well as changes in advertising revenue. While revenue from our residential high-speed internet, video and voice services are also impacted by changes in the allocation of revenue among services sold in a bundle, the allocation does not impact average monthly total revenue per customer relationship.

Average monthly Adjusted EBITDA per customer relationship for 2018 and 2017 was $62.67 and $60.62, respectively. Each of our cable services has a different contribution to operating margin. We use average monthly Adjusted EBITDA per customer relationship to evaluate the profitability of our customer base across our service offerings. We believe this metric is useful particularly as we continue to focus on growing our higher-margin businesses, including residential high-speed internet and business services.

Cable Communications Segment – Revenue

Cable Communications is one of the nation’s largest providers of high-speed internet, video, voice and security and automation services (“cable services”) to residential customers under the Xfinity brand; we also provide these and other services to business customers and sell advertising. Our Cable Communications segment generates revenue primarily from residential and business customers that subscribe to our cable services, which we market individually and as bundled services. Our Cable Communications segment also generates revenue from selling through our allocation of scheduled advertising time on cable networks that is received as part of distribution agreements with these networks to local, regional and national advertisers.

	42	Comcast 2018 Annual Report on Form 10-K

High-Speed Internet

Cable Communications offers high-speed internet services with downstream speeds that range up to 1 gigabit per second (“Gbps”) and fiber-based speeds that range up to 2 Gbps. We are also deploying wireless gateways to improve the performance of multiple IP-enabled devices used at the same time within the home, provide faster internet speeds and create an in-home Wi-Fi network. Customers with xFi-enabled wireless gateways may personalize and manage their Wi-Fi network remotely, which includes viewing and changing their Wi-Fi password, identifying which devices are connected to their in-home network, setting parental controls and schedules, as well as other features. We believe our customer base will continue to grow as consumers choose our high-speed internet service and seek higher-speed offerings.

High-speed internet revenue increased 9.3% and 8.7% in 2018 and 2017, respectively, primarily due to:

•	Increase in the number of residential customers receiving our high-speed internet services, which accounted for 4.9% and 5.1% in 2018 and 2017, respectively

•	Increase in average high-speed internet rates

Video

Cable Communications offers a broad variety of video services packages that may include premium networks, pay-per-view services and our On Demand service. Our video customers may also subscribe for additional fees to our HD and DVR advanced services.

Video revenue decreased 1.8% in 2018 primarily due to:

•	Decline in the number of residential video customers

•	To a lesser extent, changes in average video rates

Video revenue increased 3.0% in 2017 primarily due to:

•	Increase in average video rates

•	Decline in the number of residential video customers

As of December 31, 2018, 15.5 million customers subscribed to at least one of our HD or DVR advanced services compared to 15.0 million customers and 14.8 million customers as of December 31, 2017 and 2016, respectively.

We have experienced, and expect that we will continue to experience, declines in the number of residential video customers due to competitive pressures, and we expect that our video revenue will continue to decline. Competition is intense, both from traditional multichannel video providers and online video distribution services. We believe our X1 platform helps us compete more effectively against this competition, and have also continued to employ sales and marketing programs, such as promotions, bundled service offerings and service offerings targeted at specific market segments.

Voice

Cable Communications offers voice services that provide local and long-distance calling and other related features.

Voice revenue decreased 3.2% in 2018 primarily due to:

•	Decline in the number of residential voice customers

•	Decrease due to the amount allocated to voice revenue for bundled services

Voice revenue decreased 1.7% in 2017 primarily due to:

•	Decrease due to the amount allocated to voice revenue for bundled services

•	Decline in the number of residential voice customers

We expect that the number of residential voice customers and voice revenue will continue to decline.

Business Services

Cable Communications offers a variety of products and services to businesses. Small business services offerings primarily include high-speed internet services, as well as voice and video services. Cable Communications also offers Ethernet network services to medium-sized customers and larger enterprises, as well as advanced voice services, along with video solutions that serve hotels and other large venues. In addition, cellular backhaul services are provided to mobile network operators to help them manage their network bandwidth.

Comcast 2018 Annual Report on Form 10-K	43

Cable Communications has expanded its enterprise service offerings to include a software-defined networking product for our medium-sized and enterprise customers. Enterprise customers may also receive support services related to Wi-Fi networks, router management, network security, business continuity risks and other services. Enterprise service offerings are primarily provided to Fortune 1000 companies and other large enterprises with multiple locations.

Business services revenue increased 10.7% and 12.8% in 2018 and 2017, respectively, primarily due to:

•	Increase in the number of customers receiving our small and medium-sized business services offerings

•	Increase in average rates

In 2018, 2017 and 2016, revenue from our small business services offerings represented the majority of our total business services revenue. We believe the increases in the number of business customers are primarily the result of our efforts to gain market share from competitors by offering competitive services and pricing. We expect that the contribution to our growth rate from medium-sized and enterprise customers will increase relative to that of our small-business customers as small business service matures.

Advertising

As part of Cable Communications’ distribution agreements with cable networks, it generally receives an allocation of scheduled advertising time that is sold through its advertising business to local, regional and national advertisers. In most cases, the available advertising units are sold by our sales force. In some cases, it works with representation firms as an extension of its sales force to sell a portion of the advertising units allocated to it. Cable Communications also represents the advertising sales efforts of other multichannel video providers in some markets. In addition, it generates revenue from the sale of advertising on its digital platforms. It also provides technology, tools, data-driven services and marketplace solutions to customers in the media industry, which allow advertisers to more effectively engage with their target audiences. Advertising revenue is affected by the strength of the advertising market, general economic conditions, and cyclicality related to political campaigns and issue-oriented advertising.

Advertising revenue increased 14.1% in 2018 primarily due to an increase in political advertising revenue. Advertising revenue decreased 6.7% in 2017 primarily due to a decrease in political advertising revenue. Excluding the impact of political advertising revenue, advertising increased 1.7% and 0.3% in 2018 and 2017, respectively.

In 2018, 4% of our Cable Communications segment advertising revenue was generated from our NBCUniversal segments, compared to 5% in both 2017 and 2016. These amounts are eliminated in our consolidated financial statements but are included in the amounts presented above.

Other

Other revenue primarily includes revenue related to residential customer late fees. We also receive revenue related to fees from other services, such as our security and automation services.

Other revenue increased 7.9% and 5.2% in 2018 and 2017, respectively, primarily due to:

•	Increase in revenue related to the licensing of our X1 platform to other multichannel video providers

•	Increase in revenue from our security and automation services

Cable Communications Segment – Operating Costs and Expenses

Programming Expenses

Programming expenses, which represent our most significant operating expense, are the fees we incur to provide content to our video customers. These expenses are affected by the programming license fees charged by cable networks, the fees charged for retransmission of the signals from local broadcast television stations, the number of video customers we serve and the amount of content we provide.

Programming expenses increased in 2018 and 2017 primarily due to:

•	Increase in programming license fees, including retransmission consent fees and sports programming costs

•	Increase in 2017 due to the timing of contract renewals

We anticipate that our programming expenses will continue to increase, which may be at rates higher than those experienced recently, due to the timing of contract renewals in the future.

Technical and Product Support Expenses

Technical and product support expenses include costs to complete service call and installation activities, as well as costs for network operations, product development, fulfillment and provisioning.

	44	Comcast 2018 Annual Report on Form 10-K

Technical and product support expenses increased in 2018 and 2017 primarily due to:

•	Increased expenses related to the continued development, deployment and support of our X1 platform, cloud DVR technology and wireless gateways

•	Increased expenses related to the continued growth in business services and security and automation services

Customer Service Expenses

Customer service expenses include the personnel and other costs associated with handling the sale of services to customers and customer service activity.

Customer service expenses decreased in 2018 primarily due to lower personnel costs as a result of reduced call volumes.

Customer service expenses decreased slightly in 2017 primarily due to reduced call volume, which were partially offset by increased personnel costs.

Advertising, Marketing and Promotion Expenses

Advertising, marketing and promotion expenses include the costs associated with attracting new customers and promoting our service offerings.

Advertising, marketing and promotion expenses were relatively flat in 2018 and 2017.

Franchise and Other Regulatory Fees

Cable franchise and other regulatory fees represent the fees we are required to pay to federal, state and local authorities under the terms of our cable franchise agreements. Franchise and other regulatory fees decreased in 2018 primarily due to a decrease in the revenue to which the fees apply. Franchise and other regulatory fees increased in 2017 primarily due to an increase in the revenue to which the fees apply.

Other Operating Costs and Expenses

Other operating costs and expenses increased in 2018 due to an increase in costs to support our advertising sales business. Other operating costs and expenses remained relatively flat in 2017.

Cable Communications Segment – Operating Margin

Our Cable Communications segment operating margin is Adjusted EBITDA as a percentage of revenue. The most significant operating costs and expenses for our Cable Communications segment are the programming expenses we incur to provide content to our video customers, which increased 2.7% and 11.5% in 2018 and 2017, respectively. We will continue to focus on growing our higher-margin businesses, particularly residential high-speed internet and business services, and on overall operating cost management.

Our Cable Communications segment operating margin was 40.7%, 39.7% and 39.6% in 2018, 2017 and 2016, respectively.

NBCUniversal Segments Overview

2018 NBCUniversal Segments Operating Results(a)

		Revenue		Adjusted EBITDA

(a) Charts exclude the results of NBCUniversal Headquarters, Other, and eliminations.

Comcast 2018 Annual Report on Form 10-K	45

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Revenue
Cable Networks	$	11,773		$	10,497		$	10,324		12.2	%	1.7	%
Broadcast Television	11,439			9,563			10,085			19.6		(5.2	)
Filmed Entertainment	7,152			7,595			6,229			(5.8	)	21.9
Theme Parks	5,683			5,443			4,946			4.4		10.0
Headquarters, other and eliminations	(286		)	(262		)	(308		)	NM		NM
Total revenue	$	35,761		$	32,836		$	31,276		8.9	%	5.0	%
Adjusted EBITDA
Cable Networks	$	4,428		$	4,053		$	3,681		9.3	%	10.1	%
Broadcast Television	1,657			1,251			1,293			32.5		(3.3	)
Filmed Entertainment	734			1,276			662			(42.5	)	92.6
Theme Parks	2,455			2,384			2,190			3.0		8.9
Headquarters, other and eliminations	(676		)	(746		)	(688		)	NM		NM
Total Adjusted EBITDA	$	8,598		$	8,218		$	7,138		4.6	%	15.1	%

Cable Networks Segment Results of Operations

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Revenue
Distribution	$	6,826		$	6,081		$	5,978		12.3	%	1.7	%
Advertising	3,587			3,359			3,530			6.8		(4.9	)
Content licensing and other	1,360			1,057			816			28.6		29.6
Total revenue	11,773			10,497			10,324			12.2		1.7
Operating costs and expenses
Programming and production	5,357			4,599			4,863			16.5		(5.4	)
Other operating and administrative	1,453			1,326			1,279			9.5		3.7
Advertising, marketing and promotion	535			519			501			3.2		3.6
Total operating costs and expenses	7,345			6,444			6,643			14.0		(3.0	)
Adjusted EBITDA	$	4,428		$	4,053		$	3,681		9.3	%	10.1	%

Cable Networks Segment – Revenue

Distribution

Distribution revenue is generated from the distribution of our cable network programming to traditional and virtual multichannel video providers and is affected by the number of subscribers receiving our cable networks and the fees we charge per subscriber.

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Distribution	$	6,826		$	6,081		$	5,978		12.3	%	1.7	%
Distribution, excluding 2018 PyeongChang Olympics and 2016 Rio Olympics	6,590			6,081			5,680			8.4		7.1

Distribution revenue increased in 2018 primarily due to:

•	Increase in revenue associated with our broadcast of the 2018 PyeongChang Olympics

•	Increases in the contractual rates charged under distribution agreements

•	Increases due to timing of contract renewals

•	Decrease due to continued decline in the number of subscribers at our cable networks

Distribution revenue increased in 2017 primarily due to:

•	Increases in the contractual rates charged under distribution agreements

•	Increases due to timing of contract renewals

	46	Comcast 2018 Annual Report on Form 10-K

•	Decrease due to absence of revenue associated with our broadcast of the 2016 Rio Olympics

•	Decrease due to continued decline in the number of subscribers at our cable networks

Advertising

Advertising revenue is generated from the sale of advertising units sold on our cable networks and digital properties. Advertising revenue is primarily based on the price we charge for each advertising unit, which is generally based on audience ratings, the value of our viewer demographics to advertisers and the number of advertising units we can place in our cable networks’ programming schedules. Advertising revenue is affected by the audience ratings of our programming, the strength of the national advertising market and general economic conditions.

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Advertising	$	3,587		$	3,359		$	3,530		6.8	%	(4.9	)%
Advertising, excluding 2018 PyeongChang Olympics and 2016 Rio Olympics	3,445			3,359			3,396			2.6		(1.1	)

Advertising revenue increased in 2018 primarily due to:

•	Increase in revenue associated with our broadcast of the 2018 PyeongChang Olympics

•	Increase due to higher prices for advertising units sold

•	Decrease due to the impact of continued declines in audience ratings at our networks

Advertising revenue decreased in 2017 primarily due to:

•	Decrease in revenue due to the absence of our broadcast of the 2016 Rio Olympics

•	Decrease due to the impact of continued declines in audience ratings at our networks

•	Increase due to higher prices for advertising units sold

Content Licensing and Other

Content licensing and other revenue is generated primarily from the licensing of our owned programming in the United States and internationally to cable and broadcast networks and subscription video on demand services, as well as from the sale of our owned programming on DVDs and through digital distribution services such as iTunes. In addition, our cable television studio production operations generate revenue from programming the studio produces for third-party networks and for subscription video on demand services.

Content licensing and other revenue increased in 2018 and 2017 primarily due to the timing of content provided under our licensing agreements.

In 2018, 2017 and 2016, 14%, 15% and 15%, respectively, of our Cable Networks segment revenue was generated from our Cable Communications segment. These amounts are eliminated in Comcast’s consolidated financial statements but are included in the amounts presented above.

Cable Networks Segment – Operating Costs and Expenses

Programming and Production Costs

Programming and production costs include the amortization of owned and acquired programming, sports rights, direct production costs, residual and participation payments, production overhead, costs associated with the distribution of our programming to third-party networks and other distribution platforms, and on-air talent costs.

Programming and production costs increased in 2018 primarily due to:

•	Increase in costs associated with our broadcast of the 2018 PyeongChang Olympics

•	Increase in costs related to our continued investment in original programming

•	Increase in studio production costs

•	Increase in other sports programming rights

Programming and production costs decreased in 2017 primarily due to:

•	Decrease in costs due to the absence of our broadcast of the 2016 Rio Olympics

Comcast 2018 Annual Report on Form 10-K	47

•	Increase in other sports programming rights costs and higher studio production costs

Other Operating and Administrative Costs and Expenses

Other operating and administrative costs and expenses include salaries, employee benefits, rent and other overhead expenses.

These expenses increased in 2018 primarily due to:

•	Increases in employee-related costs

•	Increases in costs associated with our various digital properties

These expenses increased in 2017 primarily due to increases in employee-related costs.

Advertising, Marketing and Promotion Expenses

Advertising, marketing and promotion expenses consist primarily of the costs associated with promoting programming on our cable networks and digital properties.

Advertising, marketing and promotion expenses increased in 2018 primarily due to:

•	Increases in spending related to the 2018 PyeongChang Olympics

•	Increases in spending related to our digital properties

Advertising, marketing and promotion expenses increased in 2017 primarily due to increased spending on marketing related to programming on our cable networks and our new digital platforms.

Broadcast Television Segment Results of Operations

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Revenue
Advertising	$	7,010		$	5,654		$	6,834		24.0	%	(17.3	)%
Content licensing	2,182			2,114			1,837			3.2		15.1
Distribution and other	2,247			1,795			1,414			25.2		26.9
Total revenue	11,439			9,563			10,085			19.6		(5.2	)
Operating costs and expenses
Programming and production	7,789			6,440			6,949			20.9		(7.3	)
Other operating and administrative	1,547			1,391			1,381			11.1		0.7
Advertising, marketing and promotion	446			481			462			(7.3	)	4.2
Total operating costs and expenses	9,782			8,312			8,792			17.7		(5.5	)
Adjusted EBITDA	$	1,657		$	1,251		$	1,293		32.5	%	(3.3	)%

Broadcast Television Segment – Revenue

Advertising

Advertising revenue is generated from the sale of advertising units sold on our broadcast networks, owned local broadcast television stations and digital properties. Advertising revenue is primarily based on the price we charge for each advertising unit, which is generally based on audience ratings and the value of our viewer demographics to advertisers, and the number of advertising units we can place in our broadcast networks’ and owned local television stations’ programming schedules. Advertising revenue is affected by the strength of the national and local advertising markets, general economic conditions, cyclicality related to political campaigns and issue-oriented advertising, and the success and ratings of our programming.

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Advertising	$	7,010		$	5,654		$	6,834		24.0	%	(17.3	)%
Advertising, excluding 2018 PyeongChang Olympics, 2018 Super Bowl and 2016 Rio Olympics	5,929			5,654			5,786			4.9		(2.3	)

Advertising revenue increased in 2018 primarily due to:

•	Increase in revenue associated with our broadcasts of the 2018 PyeongChang Olympics and 2018 Super Bowl

	48	Comcast 2018 Annual Report on Form 10-K

•	Increase due to higher prices for advertising units sold

•	Decrease due to the impact of continued declines in audience ratings

Advertising revenue decreased in 2017 primarily due to:

•	Decrease due to the absence of revenue associated with our broadcast of the 2016 Rio Olympics

•	Decrease due to the impact of continued declines in audience ratings

•	Increase due to higher prices for advertising units sold

Content Licensing

Content licensing revenue is generated from the licensing of our owned programming in the United States and internationally to various distribution platforms, including to cable and broadcast networks, and to subscription video on demand services. In addition, our broadcast television studio production operations develop and produce original content that they license to broadcast networks, cable networks and local broadcast television stations owned by us and third parties, as well as to subscription video on demand services. The production and distribution costs related to our owned programming generally exceed the revenue generated from the initial network license, which means the subsequent licensing of our owned programming series following the initial network license is critical to their financial success.

Content licensing revenue increased in 2018 and 2017 primarily due to the timing of content provided under our licensing agreements.

Distribution and Other

We generate distribution and other revenue primarily from fees for retransmission consent of our owned local broadcast television stations and associated fees received from NBC-affiliated local broadcast television stations, as well as from the sale of our owned programming on DVDs and through digital distribution services. The sale of our owned programming is driven primarily by the popularity of our broadcast networks and programming series and therefore fluctuates based on consumer spending and acceptance. Distribution and other revenue also includes distribution revenue associated with our periodic broadcasts of the Olympic Games.

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Distribution and other	$	2,247		$	1,795		$	1,414		25.2	%	26.9	%
Distribution and other, excluding 2018 PyeongChang Olympics and 2016 Rio Olympics	2,135			1,795			1,274			19.0		40.9

Distribution and other revenue increased in 2018 primarily due to:

•	Increases in fees recognized under our retransmission consent agreements

•	Increase in revenue from our broadcast of the 2018 PyeongChang Olympics

Distribution and other revenue increased in 2017 primarily due to:

•	Increase in fees recognized under our retransmission consent agreements

•	Decrease due to the absence of revenue associated with our broadcast of the 2016 Rio Olympics

Broadcast Television Segment – Operating Costs and Expenses

Programming and Production Costs

Programming and production costs relate to content that originates on our broadcast networks and owned local broadcast television stations, as well as owned content that is licensed to third parties. These costs include the amortization of owned and acquired programming costs, sports rights, direct production costs, residual and participation payments, production overhead, costs associated with the distribution of our programming to third-party networks and other distribution platforms, and on-air talent costs.

Programming and production costs increased in 2018 primarily due to costs associated with our broadcasts of the 2018 PyeongChang Olympics and the 2018 Super Bowl.

Programming and production costs decreased in 2017 primarily due to:

•	Decrease in costs due to the absence of our broadcast of the 2016 Rio Olympics

Comcast 2018 Annual Report on Form 10-K	49

•	Increase due to higher studio production costs, our continued investment in original programming and increases in other sports programming rights costs

Other Operating and Administrative Costs and Expenses

Other operating and administrative costs and expenses include salaries, employee benefits, rent and other overhead expenses, and these costs increased in 2018 primarily due to employee-related costs and overhead expenses. Other operating and administrative costs and expenses increased slightly in 2017.

Advertising, Marketing and Promotion Expenses

Advertising, marketing and promotion expenses consist primarily of the costs associated with promoting our owned and acquired television programming, as well as the marketing of DVDs and costs associated with our digital properties. These expenses decreased in 2018 primarily due to decreased spending on marketing related to our news and local programming. These expenses increased in 2017 primarily due to increased spending on marketing related to our entertainment and news programming.

Filmed Entertainment Segment Results of Operations

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Revenue
Theatrical	$	2,111		$	2,192		$	1,560		(3.7	)%	40.5	%
Content licensing	2,899			2,956			2,518			(1.9	)	17.4
Home entertainment	1,048			1,287			1,182			(18.6	)	9.0
Other	1,094			1,160			969			(5.7	)	19.6
Total revenue	7,152			7,595			6,229			(5.8	)	21.9
Operating costs and expenses
Programming and production	3,446			3,500			2,881			(1.5	)	21.5
Other operating and administrative	1,189			1,260			1,086			(5.7	)	16.0
Advertising, marketing and promotion	1,783			1,559			1,600			14.3		(2.5	)
Total operating costs and expenses	6,418			6,319			5,567			1.6		13.5
Adjusted EBITDA	$	734		$	1,276		$	662		(42.5	)%	92.6	%

Filmed Entertainment Segment – Revenue

Theatrical

Theatrical revenue is generated from the worldwide theatrical release of our produced and acquired films for exhibition in movie theaters and is significantly affected by the timing of each release and the number of films we distribute, as well as their acceptance by audiences. Theatrical revenue is also affected by the number of exhibition screens, ticket prices, the percentage of ticket sale retention by the exhibitors and the popularity of competing films at the time our films are released. The success of a film in movie theaters is a significant factor in determining the revenue a film is likely to generate in succeeding distribution platforms.

Theatrical revenue decreased in 2018 primarily due to the timing of releases and the strong performance of prior year releases, which were partially offset by successful releases in the current year. Theatrical revenue increased in 2017 primarily due to the strong performances of several releases in our 2017 film slate. The following key titles released in each respective fiscal year were contributors to the drivers of changes in revenue:

Worldwide Theatrical Releases
2018	2017	2016
Jurassic World: Fallen Kingdom	The Fate of the Furious	The Secret Life of Pets
Dr. Seuss’ The Grinch	Despicable Me 3	Sing
Mamma Mia! Here We Go Again	Fifty Shades Darker
Fifty Shades Freed

Content Licensing

Content licensing revenue is generated primarily from the licensing of our produced and acquired films to cable, broadcast and premium networks, and to subscription video on demand services.

Content licensing revenue decreased in 2018 primarily due to the timing of when content was made available under licensing agreements.

	50	Comcast 2018 Annual Report on Form 10-K

Content licensing revenue increased in 2017 primarily due to the timing of when content was made available under licensing agreements, including content from DreamWorks Animation.

Home Entertainment

Home entertainment revenue is generated from the sale of our produced and acquired films on DVDs to retail stores, rental kiosks and by mail services, and in digital formats. Home entertainment revenue is significantly affected by the timing and number of our releases and their acceptance by consumers. Release dates are determined by several factors, including the timing of the exhibition of a film in movie theaters, holiday periods and the timing of competitive releases. The overall DVD market continues to experience declines due to the maturation of the DVD format from increasing shifts in consumer behavior toward digital distribution services and subscription rental services, both of which generate less revenue per transaction than DVD sales, as well as due to piracy.

Home entertainment revenue decreased in 2018 primarily due to higher sales of 2017 releases in the prior year period, which were partially offset by sales of 2018 releases in the current year period. Home entertainment revenue increased in 2017 primarily due to strong sales of several 2017 releases. The following key titles released in each respective fiscal year were contributors to the drivers of changes in home entertainment revenue:

Home Entertainment Releases
2018	2017	2016
Jurassic World: Fallen Kingdom	Sing	Jason Bourne
Fifty Shades Freed	The Fate of the Furious	The Secret Life of Pets
Mamma Mia! Here We Go Again	Despicable Me 3

Other

We also generate revenue from Fandango, our movie ticketing and entertainment business, from the sale of consumer products, from the production and licensing of live stage plays, and from the distribution of filmed entertainment produced by third parties.

Other revenue decreased in 2018 primarily due to:

•	Decrease due to the absence of revenue associated with the sale of a business in 2018

•	Decrease in revenue from consumer products

Other revenue increased in 2017 primarily due to:

•	Increase in revenue from consumer products, including from DreamWorks Animation

•	Increase in revenue from Fandango

Filmed Entertainment Segment – Operating Costs and Expenses

Programming and Production Costs

Programming and production costs include the amortization of capitalized film production and acquisition costs, residual and participation payments, and distribution expenses. Residual payments represent amounts payable to individuals hired under collective bargaining agreements to work on productions and are calculated based on post-theatrical revenue. Participation payments are primarily based on film performance and represent contingent consideration payable to creative talent, to third parties that have entered into cofinancing agreements with us and to other parties involved in the production of a film. The costs associated with producing films have generally increased in recent years and may continue to increase in the future.

Programming and production costs decreased in 2018 due to:

•	Decrease due to higher amortization of film production costs in 2017 compared to 2018

Programming and production costs increased in 2017 primarily due to:

•	Increase due to higher amortization of film production costs for our 2017 releases

•	Increase in costs due to the inclusion of costs associated with DreamWorks Animation

Other Operating and Administrative Costs and Expenses

Other operating and administrative costs and expenses include salaries, employee benefits, rent and other overhead expenses.

Other operating and administrative expenses decreased in 2018 primarily due to:

•	Decrease in employee-related costs

Comcast 2018 Annual Report on Form 10-K	51

•	Decrease due to the absence of expenses associated with the sale of a business in 2018

Other operating and administrative expenses increased in 2017 primarily due to:

•	Increase in employee-related costs

•	Increase in costs due to the inclusion of a full year of expenses associated with DreamWorks Animation

Advertising, Marketing and Promotion Expenses

Advertising, marketing and promotion expenses consist primarily of expenses associated with advertising for our theatrical releases and the marketing of our films on DVDs and in digital formats. We incur significant marketing expenses before and throughout the release of a film in movie theaters. As a result, we typically incur losses on a film prior to and during the film’s exhibition in movie theaters and may not realize profits, if any, until the film generates home entertainment and content licensing revenue. The costs associated with marketing films have generally increased in recent years and may continue to increase in the future.

Advertising, marketing and promotion expenses increased in 2018 primarily due to a higher number of releases in the current year period. Advertising, marketing and promotion expenses decreased in 2017 due to a higher number of releases in 2016 compared to 2017.

Theme Parks Segment Results of Operations

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Revenue	$	5,683		$	5,443		$	4,946		4.4	%	10.0	%
Operating costs and expenses	3,228			3,059			2,756			5.5		11.0
Adjusted EBITDA	$	2,455		$	2,384		$	2,190		3.0	%	8.9	%

Theme Parks Segment – Revenue

The Theme Parks segment generates revenue primarily from ticket sales and guest spending at Universal theme parks. Guest spending includes in-park spending on food, beverages and merchandise. Guest attendance at our theme parks and guest spending depend heavily on the general environment for travel and tourism, including consumer spending on travel and other recreational activities.

Theme Parks segment revenue increased in 2018 primarily due to:

•	Increases in guest spending, driven by increased ticket prices and spending on merchandise, food and beverage

•	Decrease due to the impact of inclement weather conditions and natural disasters in Japan

Theme Parks segment revenue increased in 2017 primarily due to:

•	Increases in guest spending and higher guest attendance driven by the continued success of The Wizarding World of Harry Potter™ attraction in Hollywood, and the openings of Minion Park™ in Japan and Volcano Bay™ in Orlando

Theme Parks Segment – Operating Costs and Expenses

Our Theme Parks segment operating costs and expenses consist primarily of theme park operations, including repairs and maintenance and related administrative expenses; food, beverage and merchandise costs; labor costs; and sales and marketing costs.

Theme Parks segment operating costs and expenses increased in 2018 primarily due to higher operating costs related to newer attractions at our domestic theme parks.

Theme Parks segment operating costs and expenses increased in 2017 primarily due to:

•	Increase in operating costs related to higher guest attendance and new attractions

•	Increase in marketing costs associated with our domestic theme parks

NBCUniversal Headquarters, Other and Eliminations

Headquarters and Other operating costs and expenses incurred by our NBCUniversal businesses include overhead, personnel costs and costs associated with corporate initiatives. Operating costs and expenses decreased in 2018 primarily due to lower employee-related costs. Operating costs and expenses increased in 2017 primarily due to higher employee-related costs.

	52	Comcast 2018 Annual Report on Form 10-K

Sky Segment

In the fourth quarter of 2018, we acquired a 100% interest in Sky through a series of transactions. Sky is one of Europe’s leading entertainment companies, which primarily includes a direct-to-consumer business, providing video, high-speed internet, voice and wireless phone services, and a content business, operating entertainment networks, the Sky News broadcast network and Sky Sports networks. Sky results for the period from October 9, 2018 to December 31, 2018 are included in our consolidated financial results as presented below. These results are not indicative of a full quarter of Sky’s operations.

(in millions)	For the period October 9, 2018 to December 31, 2018
Revenue
Direct-to-consumer	$	3,632
Content	304
Advertising	651
Total revenue	4,587
Operating costs and expenses
Programming and production	2,137
Direct network costs	399
Other	1,359
Total operating costs and expenses	3,895
Adjusted EBITDA	$	692

Customer Metrics
(in thousands)	December 31, 2018
Total customer relationships	23,600

Sky Segment – Revenue

Direct-to-Consumer

Direct-to-consumer revenue is derived from subscription and transactional revenue from residential and business customers. Subscription revenue includes revenue from residential and business subscribers to video, high-speed internet, phone and wireless phone services, including OTT subscriptions and income from set-top boxes, wireless phone handset and tablet sales, installation, service calls and warranties. Transactional revenue includes the purchase of physical and digital content, OTT daily, weekly and monthly passes, and pay-per-view programming.

Content

Content revenue is derived from the distribution of Sky’s owned television channels on third-party platforms and the licensing of owned programming to third-party video providers.

Advertising

Advertising revenue is derived from the sale of advertising and sponsorships across Sky’s owned television channels and where it represents the sales efforts of third-party channels.

Sky Segment – Operating Costs and Expenses

Programming and Production Costs

Programming and production costs primarily relate to content originating on Sky’s channels. These costs include the amortization of owned and acquired programming costs, sports rights, direct production costs, residual and participation payments, production overhead, and on-air talent costs. These expenses also include the fees associated with programming distribution agreements for channels owned by third parties, which are generally based on the number of customers who are able to watch the programming and the platforms on which the content is provided.

Direct Network Costs

Direct network costs primarily include costs directly related to the supply of high-speed internet and voice services, including wireless phone services, to Sky’s customers. This includes call costs, monthly wholesale access fees and other variable costs associated with our network. In addition, it includes the cost of mobile handsets sold to customers.

Comcast 2018 Annual Report on Form 10-K	53

Other

Other expenses include costs related to marketing, subscriber management, supply chain, transmission, technology, fixed networks and general administrative costs.

Corporate and Other Results of Operations

Year ended December 31 (in millions)	2018			2017			2016			% Change 2017 to 2018		% Change 2016 to 2017
Revenue	$	1,403		$	1,193		$	886		17.5	%	34.7	%
Operating costs and expenses	3,428			2,815			1,735			21.7		62.3
Adjustment for legal settlement	(125		)	(250		)	—			NM		NM
Adjustment for Sky transaction-related costs	(355		)	—			—			NM		NM
Adjusted EBITDA	$	(1,545	)	$	(1,372	)	$	(849	)	(12.6	)%	(61.6	)%

Corporate and Other – Revenue

Other revenue primarily relates to revenue from business development initiatives, such as our wireless phone service that launched in 2017, and from Comcast Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia, Pennsylvania.

Other revenue increased in 2018 primarily due to:

•	Increase in revenue associated with our wireless phone service

•	Decrease in revenue due to the sale of a controlling interest in our arena management-related businesses in the second quarter of 2018 and the sale of a business in the third quarter of 2017

Corporate and Other – Operating Costs and Expenses

Corporate and Other operating costs and expenses primarily include overhead and personnel costs, the costs of other business development initiatives, including our wireless phone service, and operating costs and expenses associated with Comcast Spectacor.

Corporate and Other operating costs and expenses increased in 2018 primarily due to:

•	Increase in expenses associated with our wireless phone service

•	Increase in expenses directly related to the Sky transaction, including the U.K. share acquisition tax and success-based investment banker fees, and legal, accounting and valuation services, as well as certain other impacts resulting from the Sky transaction, such as expenses resulting from the replacement of share-based compensation awards

•	Decrease in operating costs and expenses due to the sale of a controlling interest in our arena management-related businesses in the second quarter of 2018 and the sale of a business in the third quarter of 2017

•	Corporate and Other Adjusted EBITDA excludes $355 million of costs incurred in the fourth quarter of 2018 in connection with the Sky transaction, including the U.K. share acquisition tax and success-based investment banker fees, and $125 million of expenses related to a legal settlement

Corporate and Other operating costs and expenses increased in 2017 primarily due to:

•	Increase in expenses associated with our new wireless phone service

•	Increase of $171 million related to a one-time special cash bonus for eligible employees

•	Corporate and Other Adjusted EBITDA excludes $250 million of expense related to a legal settlement in 2017

Non-GAAP Financial Measure

Consolidated Adjusted EBITDA is a non-GAAP financial measure of performance and is defined as net income attributable to Comcast Corporation before net income (loss) attributable to noncontrolling interests and redeemable subsidiary preferred stock, income tax benefit (expense), investment and other income (loss), net, interest expense, depreciation and amortization expense, and other operating gains and losses (such as impairment charges related to fixed and intangible assets and gains or losses on the sale of long-lived assets), if any. From time to time we may exclude from Adjusted EBITDA the impact of certain events, gains, losses or other charges (such as significant legal settlements) that affect the period-to-period comparability of our operating performance. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the

	54	Comcast 2018 Annual Report on Form 10-K

capital-intensive nature of certain of our businesses and from intangible assets recognized in business combinations. It is also unaffected by our capital and tax structures, and by our investment activities, including the results of entities that we do not consolidate, as our management excludes these results when evaluating our operating performance. Our management and Board of Directors use this financial measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. Additionally, we believe that Adjusted EBITDA is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure of consolidated Adjusted EBITDA may not be directly comparable to similar measures used by other companies. We reconcile consolidated Adjusted EBITDA to net income attributable to Comcast Corporation. This measure should not be considered a substitute for operating income (loss), net income (loss), net income (loss) attributable to Comcast Corporation, or net cash provided by operating activities that we have reported in accordance with GAAP.

Reconciliation from Net Income Attributable to Comcast Corporation to Adjusted EBITDA
Year ended December 31 (in millions)	2018			2017			2016
Net income attributable to Comcast Corporation	$	11,731		$	22,735		$	8,678
Net income attributable to noncontrolling interests and redeemable subsidiary preferred stock	131			187			350
Income tax (benefit) expense	3,380			(7,569		)	5,298
Investment and other (income) loss, net	225			(421		)	(437		)
Interest expense	3,542			3,086			2,942
Depreciation	8,281			7,914			7,464
Amortization	2,736			2,216			1,962
Other operating gains	(341		)	(442		)	—
Adjustment for Sky transaction-related costs	355			—			—
Adjustment for legal settlement	125			250			—
Adjusted EBITDA	$	30,165		$	27,956		$	26,257

Liquidity and Capital Resources

Our businesses generate significant cash flows from operating activities. We believe that we will be able to continue to meet our current and long-term liquidity and capital requirements, including fixed charges, through our cash flows from operating activities; existing cash, cash equivalents and investments; available borrowings under our existing credit facilities; and our ability to obtain future external financing. We anticipate that we will continue to use a substantial portion of our cash flows in repaying our debt obligations, funding our capital expenditures, investing in business opportunities and returning capital to shareholders.

We also maintain significant availability under our revolving credit facilities and our commercial paper programs to meet our short-term liquidity requirements. Our commercial paper programs provide a lower-cost source of borrowing to fund our short-term working capital requirements. See Note 7 to Comcast’s consolidated financial statements for additional information on the Comcast, NBCUniversal Enterprise and Sky revolving credit facilities and the related guarantees. As of December 31, 2018, amounts available under our consolidated revolving credit facilities, net of amounts outstanding under our commercial paper programs and outstanding letters of credit, totaled $9.2 billion, which included $0.9 billion available under the NBCUniversal Enterprise revolving credit facility and $0.7 billion available under the Sky revolving credit facility.

In the fourth quarter of 2018, we acquired a 100% interest in Sky for total cash consideration of £30.2 billion (approximately $39.4 billion using the exchange rates on the purchase dates). To finance the acquisition, we used funds from unsecured term loans and senior unsecured fixed and floating rate notes. The unsecured term loans and senior notes are guaranteed by Comcast Cable and NBCUniversal. The remaining amount of consideration was funded using cash on hand. As of October 9, 2018, Sky had outstanding indebtedness that is now consolidated in our financial statements with an aggregate fair value of approximately $11.2 billion using the exchange rates as of such date, which is not guaranteed by us, Comcast Cable or NBCUniversal as of December 31, 2018.

We, NBCUniversal and Comcast Cable are subject to the covenants and restrictions set forth in the indentures governing our public debt securities and in the credit agreements governing the Comcast revolving credit facility. The financial covenant in the credit facility pertains to leverage, which is the ratio of debt to EBITDA, as defined in the credit facility. We test for compliance with this financial covenant on an ongoing basis. As of December 31, 2018, we met this financial covenant by a significant margin. We do not expect to have to reduce debt or improve operating results in order to continue to comply with this financial covenant. In addition, the Sky revolving credit facility contains two financial covenants, a ratio of net debt to EBITDA and a ratio of EBITDA to net interest payable, as defined in the Sky credit facility. The Universal Studios Japan term loans also contain certain financial covenants. As of December 31, 2018, Sky and Universal Studios Japan were in compliance with all of these covenants.

Comcast 2018 Annual Report on Form 10-K	55

Operating Activities

Components of Net Cash Provided by Operating Activities
Year ended December 31 (in millions)	2018			2017			2016
Operating income	$	19,009		$	18,018		$	16,831
Depreciation, amortization and other operating gains	10,676			9,688			9,426
Noncash share-based compensation	826			751			640
Changes in operating assets and liabilities	(1,313		)	(546		)	(1,404		)
Payments of interest	(2,897		)	(2,820		)	(2,565		)
Payments of income taxes	(2,355		)	(4,057		)	(3,693		)
Proceeds from investments and other	351			227			456
Net cash provided by operating activities	$	24,297		$	21,261		$	19,691

The variance in changes in operating assets and liabilities in 2018 compared to 2017 was primarily related to the timing of film and television costs at Sky, our broadcast of the 2018 PyeongChang Olympics and continued growth in our wireless phone service offering, partially offset by our broadcast of the 2018 Super Bowl. The variance in changes in operating assets and liabilities in 2017 compared to 2016 was primarily due to the timing of film and television production spending and related costs, net of amortization; the recognition of deferred revenue associated with our broadcast of the 2016 Rio Olympics; the payment in 2016 of a tax receivable agreement that DreamWorks Animation entered into with one of its former stockholders; and the launch in 2017 of our wireless phone service offering.

The increases in interest payments in 2018 and 2017 were primarily due to higher levels of debt outstanding, including the issuance of new debt in 2018 associated with the financing of the Sky transaction.

The decrease in income tax payments in 2018 was primarily due to federal income tax overpayments of $824 million related to the 2017 tax year that were applied to reduce tax payments in the current year, as well as a reduction in the federal income tax rate and additional depreciation deductions allowed under the 2017 Tax Act. This decrease was partially offset by higher taxable income from operations in the current year. The increase in income tax payments in 2017 was primarily due to higher taxable income from operations and payments associated with tax disputes, partially offset by tax deductions resulting from our senior notes exchange and additional depreciation deductions allowed under the 2017 Tax Act.

Investing Activities

Net cash used in investing activities in 2018 consisted primarily of cash paid for acquisitions, cash paid for capital expenditures, cash paid for intangible assets and purchases of investments. Net cash used in investing activities in 2017 consisted primarily of cash paid for capital expenditures, purchases of investments and intangible assets. Net cash used in investing activities in 2016 consisted primarily of cash paid for capital expenditures, acquisitions, deposits, purchase of investments and intangible assets.

Acquisitions, Net of Cash Acquired

In the fourth quarter 2018, we acquired Sky through a series of transactions.

In August 2016, we acquired all of the outstanding stock of DreamWorks Animation.

Capital Expenditures

Our most significant recurring investing activity has been capital expenditures in our Cable Communications segment, and we expect that this will continue in the future. The table below summarizes the capital expenditures we incurred in our Cable Communications segment in 2018, 2017 and 2016.

Year ended December 31 (in millions)	2018			2017			2016
Customer premise equipment	$	2,917		$	3,337		$	3,665
Scalable infrastructure	2,555			2,369			1,827
Line extensions	1,484			1,367			1,208
Support capital	760			879			896
Total	$	7,716		$	7,952		$	7,596

Cable Communications capital expenditures decreased 3.0% in 2018 primarily due to decreases in spending on customer premise equipment and support capital, which were partially offset by increases due to our continued investment in scalable infrastructure and increased investment in line extensions for the expansion of business services. Cable Communications capital expenditures increased 4.7% in 2017 primarily due to continued investment in scalable infrastructure to increase network capacity and increased investment in line extensions for the expansion of business services and residential. The increase in 2017 was partially offset by a decrease in spending on customer premise equipment and support capital.

	56	Comcast 2018 Annual Report on Form 10-K

Capital expenditures in our NBCUniversal segments increased 15.2% to $1.7 billion in 2018 primarily due to an increase in spending at our Universal Theme Parks. Capital expenditures in our NBCUniversal segments increased 3.4% to $1.5 billion in 2017 primarily due to continued investment at our Theme Parks segment, which was partially offset by the timing of real estate and infrastructure investment.

Capital expenditures in our Sky segment from October 9, 2018 to December 31, 2018 totaled $222 million, reflecting continued deployment of Sky Q.

We expect our capital expenditures for 2019 will be focused on continued investment in scalable infrastructure to increase network capacity in our Cable Communications segment; increased investment in line extensions for the expansion of both business services and residential; and the continued deployment of wireless gateways, our X1 platform, cloud DVR technology, Sky Q and international OTT platforms. In addition, we expect to continue to invest in existing and new attractions at our Universal theme parks. Capital expenditures for subsequent years will depend on numerous factors, including acquisitions, competition, changes in technology, regulatory changes, the timing and rate of deployment of new services, the capacity required for existing services, and the timing of new attractions at our theme parks.

Cash Paid for Intangible Assets

In 2018, cash paid for intangible assets consisted primarily of expenditures for software in our Cable Communication segment, and to a lesser extent, our NBCUniversal segment. Cash paid for intangible assets in 2017 and 2016 consisted primarily of expenditures in our Cable Communications segment.

Acquisitions and Construction of Real Estate Properties

Acquisitions and construction of real estate properties in 2018, 2017 and 2016 primarily included the construction of the Comcast Technology Center in Philadelphia, Pennsylvania.

Construction of Universal Beijing Resort

Construction of Universal Beijing Resort in 2018 and 2017 primarily included costs related to the construction of the Universal theme park and resort in Beijing, China.

Proceeds from Sales of Businesses and Investments

Proceeds from sales of businesses and investments in 2016 were primarily related to the sale of our investment in The Weather Channel’s product and technology business.

Purchases of Investments

Purchases of investments in 2018 were primarily related to capital contributions to Atairos and NBCUniversal’s capital contributions to Hulu. Purchases of investments in 2017 were primarily related to capital contributions to Atairos, our investment in Snap Inc. and NBCUniversal’s capital contributions in Hulu. Purchases of investments in 2016 were primarily related to capital contributions to Atairos and NBCUniversal’s investment in BuzzFeed, Inc.

Deposits

On April 13, 2017, the Federal Communications Commission (“FCC”) announced the results of its spectrum auction. In connection with the auction, we acquired the rights to $1.7 billion of spectrum. We had previously made a deposit of $1.8 billion to participate in the auction in 2016 and received a refund for amounts in excess of the purchase price in 2017.

Other

Other investing activities in 2018 were primarily related to proceeds received from the sale of an investment and proceeds from the settlement of derivative contracts. Other investing activities in 2017 were primarily related to proceeds of $482 million received by NBCUniversal in the FCC auction for the relinquishment of spectrum rights (see Note 8 to Comcast’s consolidated financial statements and Note 7 to NBCUniversal’s consolidated financial statements).

Financing Activities

Net cash provided by financing activities in 2018 consisted primarily of proceeds from borrowings, including the financing of the Sky acquisition, which were partially offset by repayments of debt, repurchases of common stock under our share repurchase program and employee plans, and dividend payments. Net cash used in financing activities in 2017 and 2016 consisted primarily of repayments of debt, repurchases of common stock under our repurchase program and employee plans, and dividend payments, which were partially offset by proceeds from borrowings. Proceeds from borrowings fluctuate from year to year based on the amounts paid to fund acquisitions, including Sky in 2018, and debt repayments. Net cash used in financing activities in 2017 also included the purchase of the remaining 49% noncontrolling interests in Universal Studios Japan. Net cash used in financing activities in 2016 also included our purchase of the remaining noncontrolling interest in Comcast Spectacor.

Comcast 2018 Annual Report on Form 10-K	57

We have made, and may from time to time in the future make, optional repayments on our debt obligations, which may include repurchases or exchanges of our outstanding public notes and debentures, depending on various factors, such as market conditions. See Note 7 to Comcast’s consolidated financial statements and Note 6 to NBCUniversal’s consolidated financial statements for additional information on our financing activities.

Share Repurchases and Dividends

In 2018, we repurchased a total of 140 million shares of our Class A common stock for $5.0 billion under our share repurchase program authorization. Effective January 1, 2017, our Board of Directors increased our share repurchase program authorization to a total of $12.0 billion, which does not have an expiration date. As of December 31, 2018, $2.0 billion remained under this authorization. Under the authorization, we may repurchase shares in the open market or in private transactions. We plan to pause our common stock repurchase program in 2019 to accelerate the reduction of indebtedness we incurred in connection with the acquisition of Sky.

Our Board of Directors declared quarterly dividends totaling $3.5 billion in 2018. We paid dividends of $3.4 billion in 2018. In January 2019, our Board of Directors approved a 10% increase in our dividend to $0.84 per share on an annualized basis. We expect to continue to pay quarterly dividends, although each dividend is subject to approval by our Board of Directors.

The chart below summarizes our share repurchases under our publicly announced share repurchase program authorization and dividends paid in 2018, 2017 and 2016. In addition, we paid $320 million, $435 million and $352 million in 2018, 2017 and 2016, respectively, related to employee taxes associated with the administration of our share-based compensation plans.

Share Repurchases Under Share Repurchase Program Authorization and Dividends Paid
(in billions)

Contractual Obligations

	Payment Due by Period
As of December 31, 2018 (in millions)	Total			Year 1			Years 2-3			Years 4-5			More than 5
Debt obligations(a)	$	112,947		$	4,361		$	19,414		$	16,534		$	72,638
Capital lease obligations	498			52			95			25			326
Operating lease obligations	5,263			759			1,325			894			2,285
Purchase obligations(b)	78,010			26,650			22,423			9,153			19,784
Other long-term liabilities reflected on the balance sheet(c)	6,012			366			2,941			756			1,949
Total(d)(e)	$	202,730		$	32,188		$	46,198		$	27,362		$	96,982

Refer to Note 7 and Note 17 to Comcast’s consolidated financial statements.

(a)	Excludes interest payments.

(b)

Purchase obligations consist of agreements to purchase goods and services that are legally binding on us and specify all significant terms, including fixed or minimum quantities to be purchased and price provisions. Our purchase obligations related to our Cable Communications and Sky segments, and other business development initiatives include programming contracts with cable networks and local broadcast television stations; contracts with customer premise equipment manufacturers; contracts with communications vendors and multichannel video providers for which we provide advertising sales representation; contracts to

	58	Comcast 2018 Annual Report on Form 10-K

acquire handsets and other equipment; and other contracts entered into in the normal course of business. Cable Communications’ and Sky’s programming contracts include amounts payable under fixed or minimum guaranteed commitments and do not represent the total fees that are expected to be paid under programming contracts, which we expect to be significantly higher because these contracts are generally based on the number of subscribers receiving the programming. Our purchase obligations related to our NBCUniversal and Sky segments include commitments to acquire film and television programming, including broadcast rights relating to sporting events, such as the Olympics, as well as obligations under various creative talent agreements, including obligations to actors, producers and television personalities, and various other television commitments. Purchase obligations do not include contracts with immaterial future commitments.

(c)

Other long-term liabilities reflected on the balance sheet consist primarily of subsidiary preferred shares; deferred compensation obligations; and postretirement, pension and postemployment benefit obligations. A contractual obligation with a carrying value of $1.1 billion is not included in the table above because it is uncertain if the arrangement will be settled. The contractual obligation involves an interest held by a third party in the revenue of certain theme parks. The arrangement provides the counterparty with the right to periodic payments associated with current period revenue and, beginning in June 2017, the option to require NBCUniversal to purchase the interest for cash in an amount based on a contractual formula. The contractual formula is based on an average of specified historical theme park revenue at the time of exercise, which amount could be significantly higher than the carrying value. As of December 31, 2018, the value of the contractual obligation was $1.6 billion, based on inputs to the contractual formula as of that date. See Note 17 to Comcast’s consolidated financial statements for additional information related to this arrangement. Liabilities for uncertain tax positions of $1.0 billion and the associated interest and penalties are not included in the table above because it is uncertain if or when these amounts will become payable. Payments of $2.9 billion of participations and residuals are also not included in the table above because we cannot make a reliable estimate of the period in which these obligations will be settled.

(d)	Our contractual obligations do not include our commitment to invest up to $5 billion at any one time as an investor in Atairos due to our inability to estimate the timing of this funding. As of December 31, 2018, our remaining commitment is $2.7 billion based on the capital calls received as of that date (see Note 10 to Comcast’s consolidated financial statements).

(e)	Total contractual obligations are made up of the following components.

(in millions)
Liabilities recorded on the balance sheet	$	126,353
Commitments not recorded on the balance sheet	76,377
Total	$	202,730

Off-Balance Sheet Arrangements

As of December 31, 2018, we did not have any material off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Recent Accounting Pronouncements

See Note 9 to Comcast’s consolidated financial statements and Note 8 to NBCUniversal’s consolidated financial statements for additional information related to recent accounting pronouncements, including the impact of the adoption of the updated accounting guidance related to revenue recognition.

Critical Accounting Judgments and Estimates

The preparation of our consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and contingent liabilities. We base our judgments on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe our judgments and related estimates associated with the valuation and impairment testing of our cable franchise rights and the accounting for film and television costs are critical in the preparation of our consolidated financial statements. As a result of the Sky transaction, one additional area has been identified as critical in the preparation of our consolidated financial statements. The one additional critical accounting judgment and estimate is the valuation of acquisition-related assets and liabilities. Management has discussed the development and selection of these critical accounting judgments and estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed our disclosures relating to them, which are presented below. See Notes 4, 8 and 12 to Comcast’s consolidated financial statements for a discussion of our accounting policies with respect to these items.

Comcast 2018 Annual Report on Form 10-K	59

Valuation and Impairment Testing of Cable Franchise Rights

Our cable franchise rights assets result from agreements we have with state and local governments that allow us to construct and operate a cable business within a specified geographic area. The value of a franchise is derived from the economic benefits we receive from the right to solicit new customers and to market additional services in a particular service area. The amounts we record for cable franchise rights are primarily a result of cable system acquisitions. Typically when we acquire a cable system, the most significant asset we record is the value of the cable franchise rights. Often these cable system acquisitions include multiple franchise areas. We currently serve approximately 6,400 franchise areas in the United States.

We have concluded that our cable franchise rights have an indefinite useful life since there are no legal, regulatory, contractual, competitive, economic or other factors which limit the period over which these rights will contribute to our cash flows. Accordingly, we do not amortize our cable franchise rights but we assess their carrying values annually, or more frequently whenever events or changes in circumstances indicate that the carrying amount may exceed the fair value (“impairment testing”).

For the purpose of our impairment testing, we have grouped the recorded values of our various cable franchise rights into our three Cable Communications divisions or units of account. We evaluate the unit of account periodically to ensure our impairment testing is performed at an appropriate level.

The annual impairment test for indefinite-lived intangible assets allows for the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of the asset is less than its carrying amount. An entity may choose to perform the qualitative assessment or an entity may bypass the qualitative assessment and proceed directly to the quantitative impairment test. If it is determined, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is, more likely than not, less than its carrying value, the quantitative impairment test is required. When performing a quantitative assessment, we estimate the fair value of our cable franchise rights primarily based on a discounted cash flow analysis that involves significant judgment. When analyzing the fair values indicated under the discounted cash flow models, we also consider multiples of Adjusted EBITDA generated by the underlying assets, current market transactions and profitability information.

In 2018, we performed a quantitative assessment of our cable franchise rights. Based on this assessment, the estimated fair values of our franchise rights exceeded the carrying value of the Northeast, Central and West divisions by 29%, 46% and 58%, respectively.

Since the adoption of the accounting guidance related to goodwill and intangible assets in 2002, we have not recorded any significant impairment charges to cable franchise rights.

We could record impairment charges in the future if there are changes in long-term market conditions, in expected future operating results, or in federal or state regulations that prevent us from recovering the carrying value of these cable franchise rights. Assumptions made about increased competition and economic conditions could also impact the results of any qualitative assessment and the valuations used in future annual quantitative impairment testing and result in a reduction in the fair values of our cable franchise rights. In addition, a future change in the unit of account could result in the recognition of an impairment charge.

Film and Television Costs

We capitalize film and television production costs, including direct costs, production overhead, print costs, development costs and interest. We amortize capitalized film and television production costs, including acquired libraries, and accrue costs associated with participation and residual payments to programming and production expenses. We generally record the amortization and the accrued costs using the individual film forecast computation method, which amortizes the costs using the ratio of the current period’s revenue to estimated total remaining revenue from all sources (“ultimate revenue”). Estimates of ultimate revenue have a significant impact on how quickly capitalized costs are amortized and, therefore, are updated regularly.

Our estimates of ultimate revenue for films generally include revenue from all sources that are expected to be earned within 10 years from the date of a film’s initial release. These estimates are based on the historical performance of similar content, as well as factors unique to the content itself. The most sensitive factor affecting our estimate of ultimate revenue for a film intended for theatrical release is the film’s theatrical performance, as subsequent revenue from the licensing and sale of a film has historically exhibited a high correlation to its theatrical performance. Upon a film’s release, our estimates of revenue from succeeding markets, including from content licensing across multiple platforms and home entertainment sales, are revised based on historical relationships and an analysis of current market trends.

With respect to television series or other owned television programming, the most sensitive factor affecting our estimate of ultimate revenue is whether the series can be successfully licensed beyond its initial license. Initial estimates of ultimate revenue are limited to the amount of revenue contracted for each episode under the initial license. Once it is determined that a television series or other owned television programming can be licensed for subsequent platforms, revenue estimates for these platforms, such as U.S. and international syndication, home entertainment, and other distribution platforms, are included in ultimate revenue. Revenue estimates for produced episodes include revenue expected to be earned within 10 years of delivery of the initial episode or, if still in production,

	60	Comcast 2018 Annual Report on Form 10-K

5 years from the delivery of the most recent episode, if later.

We capitalize the costs of programming content that we license but do not own, including rights to multiyear, live-event sports programming, at the earlier of when payments are made for the programming or when the license period begins and the content is made available for use. We amortize capitalized programming costs as the associated programs are broadcast. We generally amortize multiyear, live-event sports programming rights using the ratio of the current period revenue to the estimated ultimate revenue or under the terms of the contract.

Capitalized film and television costs are subject to impairment testing when certain triggering events are identified. If the fair value of a production were to fall below its unamortized cost, we would record an adjustment for the amount by which the unamortized capitalized costs exceed the production’s fair value. The fair value assessment is generally based on estimated future discounted cash flows, which are supported by our internal forecasts. Adjustments to capitalized film production costs were not material in any of the periods presented.

Fair Value of Acquisition-Related Assets and Liabilities

We allocate the purchase price of acquired companies to tangible and intangible assets and liabilities based on their estimated fair values. In determining fair value, management is required to make estimates and assumptions that affect the recorded amounts. Management’s estimates of fair value are based on assumptions believed to be reasonable but that are inherently uncertain. As part of the estimation process, third-party valuation specialists are engaged to assist in the valuation of certain of these assets and liabilities.

Our judgments used to determine the estimated fair value assigned to each class of acquired assets and liabilities, as well as asset lives and depreciation and amortization methods, have a material impact on our consolidated financial statements. For instance, the determination of asset lives impacts our results of operations as different types of assets have different useful lives and certain assets may be considered to have indefinite useful lives.

Due to the timing of the Sky acquisition, the allocation of purchase price is based on preliminary estimates and is subject to change. Below is a summary of the methodologies and significant assumptions used in estimating the fair value of certain of Sky’s assets and liabilities for which preliminary estimates were determined. Other assets, such as property and equipment, have been recorded based on historical cost as no better estimate was available as of December 31, 2018.

Intangible Assets

Intangible assets primarily consist of our estimates of fair value for finite-lived customer relationships, and indefinite-lived trade names.

Customer relationships were valued using a multiperiod cash flow model, a form of the income approach. This measure of fair value requires considerable judgments about future events, including attrition, contract renewal estimates and technology changes.

In determining the estimated lives and method of amortization for finite-lived intangibles, we use a method and life that closely follows the undiscounted cash flows over the estimated life of the asset.

Trade names were valued using the relief-from-royalty method, a form of the income approach. This measure of fair value requires considerable judgment about the value a market participant would be willing to pay in order to achieve the benefits associated with the trade name.

Contractual Obligations

Contractual obligations were adjusted to market rates using a combination of discounted cash flows and market assumptions, when available.