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Peacock, the streaming service of Comcast’s entertainment unit NBCUniversal, grew its revenue and subscribers in the fourth quarter, but its loss widened again compared with the year-ago period. In a conference call, management reiterated that the streamer’s loss would peak this year, predicting a loss of $3 billion.
Comcast’s earnings report for the final period of 2022 detailed quarterly financials for NBCUniversal, including higher advertising revenue in its media unit, but lower ad revenue when excluding the soccer World Cup, and improved studios unit results, European pay TV and technology giant Sky, as well as latest pay TV and broadband subscriber figures for its core cable systems business.
Amid a recent industrywide focus on restructurings and staff layoffs to boost profitability, the media and technology giant also disclosed $638 million in severance costs, or $541 million higher than in the year-ago period, that hit its earnings in the fourth quarter. That included $305 million in higher severance costs related to its cable systems division, $182 million in severance costs related to NBCUniversal and $53 million in higher costs related to Sky. “We offered voluntary retirement across the company,” in addition to “tactical situations we have in selected businesses to just make sure we are as efficient as we can be heading into uncertain times,” Comcast president Michael Cavanagh said on the conference call.
Comcast, led by chairman and CEO Brian Roberts, had previously reported that Peacock’s paid subscribers in the U.S. had “surpassed 15 million” as of the end of the third quarter, meaning it added around 5 million in the final quarter of 2022. In early December, NBCU CEO Jeff Shell had told investors that the streamer had by then hit 18 million. On Thursday, the company said U.S. paid subs surpassed the 20 million mark as of the end of 2022, marking its strongest quarterly gain since its launch in 2020.
Management said full-year losses related to Peacock amounted to $2.5 billion in 2022, in line with the company’s guidance. It is expecting the loss to widen to around $3 billion this year, it told analysts. “As we have said before, we believe 2023 will be peak losses for Peacock, and from there [they will] steadily improve,” Cavanagh added.
In its fourth-quarter financial report, Comcast also posted NBCU earnings before interest, taxes, depreciation and amortization (EBITDA) that fell 36.3 percent to $817 million from $1.28 billion amid higher expenses, even though revenue rose 5.9 percent to $9.89 billion.
NBCU’s media unit results included $660 million of fourth-quarter revenue and an adjusted EBITDA loss of $978 million related to Peacock. That compared to $335 million of revenue and an adjusted EBITDA loss of $559 million related to the streamer in the prior-year period.
The unit also said its advertising revenue increased 4 percent in the fourth quarter, “primarily due to incremental revenue from the FIFA World Cup, as well as an increase in Peacock advertising revenue.” That included $263 million in incremental ad revenue from the World Cup. Excluding that, the unit would have posted a 5.6 percent ad drop due to the “softening” of the overall market, management said. “The ad market steadily worsened over the course of last year,” Shell said on Thursday’s earnings call. “It kind of feels like it bottomed out around late November, early December.” He later added: “It feels like it has stabilized a bit.”
Total media unit revenue for the latest quarter increased 2.6 percent to $6.0 billion, while adjusted EBITDA fell 81.7 percent to $132 million amid higher operating expenses. “The increase in operating expenses was primarily due to higher programming and production costs, reflecting higher costs at Peacock and higher sports programming costs associated with Telemundo’s broadcast of the FIFA World Cup,” the company said.
Fourth-quarter revenue at NBCU’s studios unit increased 13.1 percent to $2.7 billion “due to higher content licensing and theatrical revenue.” The former jumped 15.9 percent, “primarily due to the timing of when content was made available by our film and television studios under licensing agreements, including additional sales of content as production levels returned to normal.” Theatrical revenue shot up 47.3 percent, “primarily due to the successful performance of recent releases, including Ticket to Paradise, Puss in Boots: The Last Wish, Violent Night and Halloween Ends.”
Quarterly adjusted EBITDA in the studios unit more than tripled to $160 million thanks to the higher revenue, which more than offset increased expenses due to an increase in advertising, marketing and promotion expenses “reflecting the size and timing of this quarter’s theatrical slate,” as well as higher programming and production expenses, “reflecting higher amortization of film production costs in the current year period.”
Quarterly revenue for NBCU’s theme parks division rose 12.0 percent to $2.1 billion, “primarily due to increased attendance and guest spending at our parks in the U.S. and Japan compared to the prior-year period.” Adjusted EBITDA increased 16.0 percent to $782 million due to the higher revenue, partially offset by higher operating expenses.
For the full year 2022, the theme parks boosted its adjusted EBITDA to $2.7 billion, a new record, which the company said was “reflecting increases at each park compared to 2021.”
In Comcast’s cable systems unit, total customer relationships decreased by 71,000 to 34.3 million in the fourth quarter. Excluding the negative impact from Hurricane Ian, the firm estimated that total customer relationships decreased by 36,000. Its broadband customer base declined by 26,000, but it would have grown by 4,000 when excluding the negative impact from Hurricane Ian. In the year-ago period, Comcast had added 212,000 broadband subscribers. Total video customer net losses amounted to 440,000 in the fourth quarter, compared with a drop of 373,000 in the final quarter of 2021.
Sky’s revenue for the period decreased 13.0 percent to $4.4 billion. Excluding the impact of currency, revenue was unchanged from the prior-year quarter. Advertising revenue fell 9.6 percent to $564 million, “primarily reflecting lower revenue in the U.K., including the impact of the timing of the FIFA World Cup,” the company said. “Content revenue increased 6.5 percent to $304 million, primarily due to the timing of licensing our content to other platforms.” Adjusted EBITDA for Sky dropped 26.7 percent to $340 million, or 15.1 percent when excluding the impact of currency. The decline reflected higher operating expenses, “including $53 million in higher severance expense,” as well as higher direct network costs amid growth in the firm’s residential mobile and broadband businesses.
Sky’s total customer relationships increased by 129,000 to 23.1 million in the fourth quarter, leaving the full year 2022 up by 88,000.
In its third-quarter results, Comcast had recorded “noncash impairment charges related to goodwill and intangible assets in our Sky segment totaling $8.6 billion.”
Comcast on Thursday also unveiled an increase in its dividend by 8 cents per share, or 7.4 percent, to $1.16 per share on an annualized basis for 2023.
“I am proud of how our team executed throughout 2022,” said Roberts. “We achieved the highest levels of revenue, adjusted EBITDA and adjusted earnings per share in our history and returned a record $17.7 billion of capital to shareholders. We delivered impressive revenue growth in broadband; grew wireless lines by 1.3 million, our best result since launch; more than doubled our Peacock subscribers, surpassing 20 million at year-end; nearly tripled Peacock revenue to $2.1 billion; ranked second in worldwide box office; and generated record adjusted EBITDA at our theme parks.”
He added: “We are excited to begin the new year as an innovative leader in large profitable markets with a strong balance sheet and a strategy to drive incremental returns and bring outstanding content and experiences to our customers. The board’s confidence in our position and path forward is underscored by today’s announcement that we are increasing our dividend for the 15th consecutive year.”
Thursday’s earnings call marked the first for Michael Cavanagh since his promotion from the CFO role to the post of president.
Shell was also asked on the earnings call how he feels about the outlook for NBCU and growth amid current industry challenges. “We feel really good about NBCU’s growth trajectory going forward,” he replied. With the film slate looking “really good,” and the TV studios doing “great,” he said: “Our content business is doing great, and that is a business that should grow over time.”
Theme parks had a record 2022, with “a lot of growth ahead,” Shell continued. But the media unit has been hit by ad softness, cord cutting and investment in Peacock. “We have been clear from the start that we are going to see a return on that investment,” Shell said. “We also made that investment to return the media segment to growth over time.” But the timing is “up to macro conditions,” he argued. “When does the ad market recover? What are linear [TV] declines going forward? And then, of course, we continue to cut costs in the linear segment to maintain our margins. So, I’m pretty confident that we have a lot of growth ahead in NBCUniversal.”
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