Comcast on Thursday reported steep cable video subscriber losses for another quarter, but provided new financial details around its Peacock streaming service which has now topped 22 million subscribers.
Video subscriber losses reached 614,000 – more than the 512,000 it lost in the same period a year ago and higher than quarterly losses recorded across each quarter of 2021 and 2022. Comcast’s domestic video base now stands around 15.52 million.
Speaking on the company’s first quarter earnings call, Comcast Cable President and CEO Dave Watson discussed video attachment being down and reiterated that Comcast had made the decision in terms of its rate approach, to not subsidize unprofitable video relationships as it pivots to focus on the overall relationship – including connectivity through its broadband and wireless offerings.
Watson did emphasize that while there was an uptick in people dropping video, he noted that people are still keeping broadband and so total disconnect churn (among video and broadband) remains “at record low levels and is down nearly 25% since the pre-pandemic period.”
It’s not totally pivoting away from video, with Watson saying, “there’s still some video packaging we’re going to be very focused on, based on this segment… It’s important to us, but we have figured out a way to manage it financially.”
He added that the net result is broadband is faring well and maintaining the base of total connectivity subs, “so as things continue to go and evolve more towards streaming, I think we’re in a great position.”
And Comcast still has hands in the video arena through investments in platforms, as can be seen with efforts on its Xumo streaming platform joint venture with Charter, with Watson also pointing to its Xfinity X1 and Flex platforms. “So yes the video losses did a bit of an uptick, but did offset it with some of these platform relationships that I think long term are going to be very important,” Watson said.
Just last week Xumo CRO Colin-Petrie Norris told Fierce Video that Xumo’s enterprise arm powered 77 of the built-in free ad-supported streaming TV channels recently launched on Google TV.
Total revenue for Comcast’s connectivity and platforms unit (which includes residential and business broadband, wireless, and video offerings) decreased 1.8% to $20.15 billion but adjusted EBITDA increased 3.2% to $8.09 billion, driven by growth in the residential business, and Adjusted EBITDA margin increased to 40.2%.
Peacock sees subscriber, revenue bumps
As for the NBCUniversal side of the business, executives commented on leadership changes, following the abrupt departure of unit head Jeff Shell earlier this week who was ousted.
Michael Cavanagh, president of Comcast who is also stepping in to head up NBCUniversal as CEO in Shell’s absence, said that while it’s unfortunate to have an unexpected change in leadership there’s no reason to revisit the NBCU strategy as a result and doesn’t think “the business is going to miss a beat.”
NBCU’s content and experience segment (which incorporates media, theme parks, studios and streaming businesses), saw revenue decline nearly 10% in the first quarter to $10.25 billion, primarily due to a hard comparison from last year’s key events of the Beijing Olympics and Super Bowl which had added $1.5 billion in incremental revenue for the media segment. EBITDA decreased 1% to $1.6 billion partially due to planned heavy investment in Peacock and lower linear advertiser sales, but execs also touted strong growth for the streaming service.
That includes usage on the platform, where Cavanagh pointed to the pay-1 movie windowing strategy on Peacock as a successful acquisition and retention tool, alongside next-day broadcast content from NBC and Bravo, Peacock originals, plus sports like Sunday Night Football and the Premiere League.
And as subs climbed from 20 million at the end of Q4 to 22 million as of Q1 2023, engagement on Peacock has grown to roughly 20 hours per subscriber per month, which in turn is helping to fuel strong growth in advertising revenue, according to Cavanagh. Although NBCU continues to invest, he cited confidence about the streaming service’s ability to break even and grow from there.
In Q1 for the first time Comcast broke out new financial metrics for Peacock including advertising and distribution revenue.
In the first three months of 2023 Peacock generated $304 million in advertising revenue, alongside $352 million in distribution revenue and $29 million in other revenue, for a total of $685 million. Excluding the Olympics and Super Bowl, Peacock ad revenue grew 90%. Peacock distribution revenue was up 83%, while total revenue was up 45%, driven by growth in paid subscribers (earlier this year Peacock stopped offering a free version of its service to new subscribers). On the cost side, Peacock totaled $1.38 billion, with $1.03 billion going to programming and production and $354 million on marketing and promotion. Peacock losses amounted to $704 million, with executives reiterating that they anticipate Peacock losses to peak this year at a total around $3 billion and steadily improve from there.
Cavanagh on the call said that while the company has proven special content and major events like The World Cup can be significant drivers of reeling in new subs, “perhaps equally or even more important is sustaining engagement following this type of acquisition content and delivering on retention” something it saw in the first quarter.
Overall Comcast’s consolidated revenue of $29.7 billion was down 4.3% over last year. Adjusted EBITDA increased 2.9% to $9.4 billion, and Comcast recorded $3.8 billion in free cash flow.