Peacock, the streaming service of Comcast’s entertainment unit NBCUniversal, reached more revenue, but its loss widened in the first quarter, while NBCU overall grew its earnings, Comcast disclosed in its latest financial report on Thursday.
The company also shared on an earnings call that Peacock added 4 million paid subscribers in the first quarter to end it with more than 13 million paid subs and 28 million monthly active accounts in the U.S., up from 24.5 million as of the end of 2021.
Comcast chairman and CEO Brian Roberts said user momentum and engagement came in ahead of expectations, helped by such hit content as the Winter Olympics in Beijing, the Super Bowl, the debut of Peacock’s most successful original so far, Bel-Air, and the day-and-date release of Marry Me. “Importantly, retention on our service after airing all of this special content in such a concentrated period of time was well above our expectation,” Roberts said. “We have seen a 25 percent increase in hours of engagement year-over-year.”
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But management signaled that after the stronger-than-expected growth in the first quarter subscriber gains will be less pronounced in the coming quarters before what is expected to be a strong end of the year, helped by such sports as the NFL and the soccer World Cup, such tentpole films as Jurassic World Dominion and such original series as Vampire Academy. Also, starting in September, NBCU will move next-day airings of such NBC shows as The Voice from Hulu to Peacock.
NBCU’s media unit results included $472 million of revenue and an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) loss of $456 million related to Peacock, “including amounts attributable to the 2022 Beijing Olympics and the NFL’s Super Bowl, compared to $91 million of revenue and an adjusted EBITDA loss of $277 million in the prior-year period,” the company said.
Executives of the media, entertainment and technology conglomerate reaffirmed a full-year 2022 EBITDA loss related to Peacock of around $2.5 billion, with higher losses in the second half of the year due to such things as the timing of content launches. Management had previously said it would step up spending on Peacock due to more upside in paid subscribers. Beginning in the first quarter of 2021, the financial impact of Peacock, previously reported in the “corporate and other” segment, have been included in the results of NBCU, led by CEO Jeff Shell.
Asked what Netflix’s first-quarter subscriber drop means for NBCU’s approach to streaming, Shell highlighted on Thursday that the company has from the start emphasized its different approach from other entertainment and technology conglomerates. “We don’t view Peacock really as a separate, distinct business,” he said. “We think it is an extension of our existing TV business, and we manage it that way. … I think that strategy is working.”
Shell later added: “Our business strategy is great for us, it is working,” even though management would “continue to evaluate” streaming trends and adjust its strategy if needed. “We are happy with how the business is scaling and think the noise in the rest of the streaming business really, if anything, just validates where we are going.”
Comcast on Thursday also reported NBCU’s first-quarter EBITDA rose 7.4 percent to $1.60 billion on revenue of $10.30 billion, up 46.6 percent. Media unit revenue jumped 36.6 percent to $6.87 billion, but when excluding the Winter Olympics and Super Bowl, revenue in the division rose 6.9 percent to $5.38 billion.
At NBCU, studios unit revenue jumped 15.1 percent to $2.8 billion, “primarily reflecting higher content licensing revenue and theatrical revenue.” Content licensing revenue increased 9.8 percent, driven by film and television content licensing and also “reflects the comparison to the same period last year, which included a new licensing agreement for content that became exclusively available for streaming on Peacock.” Theatrical revenue grew by $129 million to $168 million, “primarily driven by the recent release Sing 2 and a favorable comparison to the prior-year period, which was adversely impacted by theater closures and theaters operating at reduced capacity due to COVID-19,” the company explained.
Adjusted EBITDA at the studios division fell 50.7 percent to $245 million in the first quarter of 2022 on higher operating expenses, which more than offset higher revenue. “The increase in operating expenses was driven by higher programming and production expenses, reflecting higher amortization of television and film production costs in the current year period and compared to the prior year period when production was impacted due to COVID-19, as well as an increase in advertising, marketing and promotion expenses ahead of upcoming film releases,” the company said.
Media unit revenue increased 36.3 percent to $6.9 billion in the first quarter, “primarily reflecting higher advertising revenue and distribution revenue.” Excluding $963 million of revenue generated by airing the 2022 Beijing Olympics and $519 million of revenue generated by the broadcast of the Super Bowl, media revenue increased 6.9 percent. Advertising revenue jumped 59.2 percent, driven by the sports events and “additional Peacock sales.” Distribution revenue rose 21.6 percent thanks to the likes of Peacock and contractual rate increases, partially offset by a decline in pay TV subscribers at the firm’s networks.
Adjusted EBITDA at the media segment fell 21.3 percent to $1.2 billion in the first quarter on higher operating expenses, “primarily driven by higher programming and production expenses, reflecting higher sports programming costs associated with the broadcasts of 2022 Beijing Olympics and the NFL’s Super Bowl, as well as higher programming costs at Peacock.
NBCU’s theme parks unit posted a $941 million revenue gain to $1.6 billion in the first quarter, citing “improved operating conditions compared to the prior-year period, when each of our theme parks in the U.S. and Japan was either operating at limited capacity or closed as a result of COVID-19, and also the opening of Universal Beijing Resort in September.” Theme parks adjusted EBITDA swung to a profit of $451 million from a year-ago loss of $61 million.
During Thursday’s earnings call, Shell touted the momentum at theme parks. Comcast CFO Mike Cavanagh touted “exceptional demand” at domestic parks, with attendance “back to pre-pandemic levels” and Orlando hitting its highest-ever first-quarter EBITDA. But he said that international parks were affected by the pandemic. Attendance at the Beijing resort was impacted in the latest quarter by COVID-19, but it only brought in a “slight” EBITDA loss in the period.
Comcast also reported quarterly subscriber and financial trends at its core cable systems, where pay TV customers declined by 512,000, while broadband customers grew by 262,000, and its European pay TV business Sky.
The broadband user gains Comcast added 262,000 high-speed internet customers in the quarter, above the 229,000 average analyst estimate. But on its earnings calls, Comcast disclosed that about 80,000 of the additions in the latest period were previously added free Internet Essentials customers who have now started paying for the service. Excluding those saw the company miss analysts’ broadband user growth estimates, which hit the stock. As of 11 a.m. ET, Comcast shares were down 7.9 percent at $40.96.
Roberts who touted the company’s latest results and overall momentum. “Our media business is performing well, and the scale of our reach is underscored by our successful broadcast of the Super Bowl and the Olympics in the same week,” he said. “These events were viewed by more than 200 million people in the U.S. across NBCUniversal’s platforms, including Peacock, which had an exceptional quarter.”
Asked on Thursday’s call about potential deal-making opportunities, Roberts said, “I don’t think there are any new things to report today.”
