Comcast’s move to stop offering free Peacock Premium for certain Xfinity customers in June drove subscriber growth for the SVOD in the second quarter as the company converted those users to paid subs.
NBCUniversal’s Peacock added 2 million subscribers in Q2 to reach 24 million, nearly double its base from a year ago.
Last month, Comcast started an effort to transition Xfinity bundled subscribers who were getting the premium version of the service for free to a paid relationship, an undertaking which is nearly halfway complete.
Speaking on Thursday’s earnings call, Comcast CFO Jason Armstrong indicated the effort will continue to drive streaming subscribers this year.
“We’ve made some nice progress to date as the conversion activity drove Peacock second quarter subscriber growth,” Armstrong said. “And we’re bullish on further increasing our Peacock subscriber base through the balance of 2023 driven by both our continued conversion efforts, as well as a strong programming slate in the second half.”
Armstrong also reiterated confidence for the Peacock strategy with both subscription and ad revenue, which is helping lessen the impact of drops in linear revenue.
“As viewership shifts to streaming our dual revenue strategy at Peacock where we’re growing advertising and distribution revenue is offsetting declines in linear revenue,” commented Armstrong. “At the same time we’re managing costs at our linear networks and reallocating some of these resources to Peacock with the goal of maximizing profitably over the long-term across our media portfolio.”
Comcast’s media segment, which includes Peacock and TV networks, saw flat revenue of $6.19 billion. Media segment adjusted EBITDA decreased 18% to $1.2 billion, including a $651 million EBITDA loss at Peacock. Peacock revenue was up 82% year over year to $820 million. In the media segment, domestic advertising revenue was down nearly 5% to $2 billion, partially offset by growth at Peacock where ad revenue climbed 75%. Distribution revenue growth of nearly 70% at Peacock helped a 2.2% bump in total media distribution revenue to $2.6 billion.
At the same time, Comcast’s traditional pay TV video customer base continued to shrink. The cable operator reported 543,000 net video losses in the period. It’s fewer than the 614,000 it lost in Q1, and more than the 521,000 it lost in Q2 2022. Comcast’s traditional video base now stands around 15 million, down from the roughly 19 million it had two years ago. Video generated $7.3 billion in revenue in Q2, down 5.6% from a year ago.
Still, the cable operator counted revenue gains in broadband and wireless, as well as theme parks. Consolidated revenue of $30.5 billion was up 1.7%, while adjusted EBITDA rose 4.2% to $10.2 billion.
In terms of the ongoing dual actors and writers strike that’s brought much of Hollywood to a standstill, Comcast President Michael Cavanagh said “we are committed to reaching a fair deal with the guilds as soon as possible,” referring to the Writers Guild of America and SAG-AFTRA unions.
He added that for the industry overall, with a prolonged work stoppage “the longer it goes, the worse it’ll be. It’s obviously going to have a negative impact all around.”
He noted the strikes will shift studio working capital from near-term to longer out, meaning a little lower working capital and higher free cash flow in 2023, followed by the reverse in 2024.
Cavanagh said there wasn’t anything in particular to call out about the strikes’ effect on Peacock in the second half of the year, but “the longer a strike, the more that could have an effect as you look into ’24 and beyond, and that would be for ourselves and others obviously, so it’s a level playing field.”
The Comcast exec did point to sports content coming to Peacock in the second half including NFL and Big Ten, as well as films such as The Super Mario Bros. Movie and an original TV series related to the John Wick franchise called The Continental.
“Beyond that on Peacock, I think there’ll be a continuation of the good work that we’ve done inside the company to convert Comcast subscribers over to a paying subscriber status which we’re not quite halfway through that as we only got started in June,” he added.