Comcast warned investors to expect higher video subscriber losses in 2020 due to several factors that will impact the legacy video distribution business.
Michael Cavanagh, chief financial officer at Comcast, said Thursday during the company’s fourth-quarter earnings call that consumer cord-cutting trends and rate increases will likely drive higher declines. Comcast reported a net loss of 149,000 video subscribers in the fourth quarter, which brought its full-year total video losses to 733,000.
Video subscriber declines have been largely secular while AT&T’s satellite provider, DirecTV, has seen the worst of it. Comcast and other cable providers like Charter have shifted their focus to their broadband and mobile internet businesses as video fades. However, Comcast has continued to invest in its X1 video platform along with Flex, its video aggregation product for broadband subscribers, and Peacock, its upcoming ad-supported streaming service.
Dave Watson, CEO of Comcast Cable, said the primary focus with Flex is driving broadband growth but he said the platform could also drive more app engagement and advertising opportunities for Peacock.
Last week, NBCUniversal announced that Peacock will be ad-supported, and that the free tier will have more than 7,500 hours of content. Matt Strauss, chairman of Peacock and NBCUniversal Digital Enterprises, said that the service will limit its ad loads to five minutes of commercials per hour. The company will also sell Peacock Premium for $4.99 per month (or $9.99/month with no ads). The service will have more than 15,000 hours of content, including original series.
Peacock Premium will also be bundled free for almost all Comcast Xfinity TV and Flex broadband customers. Premium will also be free to Cox subscribers and available on the Cox Contour box, which is a licensed version of Comcast’s X1 platform and hardware.
Cavanagh said that there’s still about 80% of the U.S. population that subscribes to traditional pay TV and he said that eventually he thinks they will all be able to get the $5/month Peacock product for free. However, Comcast still needs to get other providers like Charter and DirecTV on board with distributing Peacock.
“It’s such a great value to be able to give all your customers a product that’s $5 a month in value (or $60 a year) for free, that I think eventually we will get the vast majority, if not all, of cable and satellite. It will take some time and a lot of times the Peacock discussion will be tied to the ongoing MVPD discussion. We have a lot of big deals up in this year. But I think, by the end of this year, you’re going to see the $5 Peacock product offered for free to a lot of cable and satellite customers.”
Wide distribution and advertising revenue will be two of the keys for Comcast/NBCU in meeting the goals set for Peacock. The company expects the service to attract 30 million to 35 million active accounts in the U.S., $2.5 billion in revenue with $6 to $7 ARPU driven mostly by advertising, and breakeven adjusted EBITDA, all by 2024.