Comcast Outlines NBCU Restructuring Plan, Theme Parks Recovery

Brian Roberts - H - 2018
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Comcast CEO Brian Roberts

The company expects more than $700 million in charges this year. "We have done away with the concept of creating a piece of work for a specific network,” says Comcast boss Brian Roberts.

The restructuring of the TV and streaming business of Comcast's NBCUniversal featured prominently on the company's third-quarter earnings conference call on Thursday.

"In essence, we have done away with the concept of creating a piece of work for a specific network," Comcast chairman and CEO Brian Roberts said.

NBCU recently rejigged and streamlined key parts of its operations to cut costs and update structures for the digital age. A recently launched TV and Streaming unit, which combined those businesses under Mark Lazarus, was part of a restructuring designed to shift resources and investment from linear to streaming, but also causing job cuts. On Thursday, Roberts explained the move this way: "In essence, we have done away with the concept of creating a piece of work for a specific network."

Management showed a slide saying the move would drive “long-term value.” It showed the old structure as being “fragmented, with individual network executive teams” and optimizing "specific networks and brands.” The new structure "optimizes [the] full portfolio of linear and digital outlets" and is "centralized, with small programming executive teams."

NBCU CEO Jeff Shell during the third-quarter earnings conference call said the costs for the restructuring are hitting over the course of about a year, with a third "in this current quarter" and most of it having hit by midyear 2021, which will lead to "a lot less cost" and position the company for future opportunities. "We are kind of through the execution of most of our restructuring," he said, adding that the changing world and industry, including revenue pressures, mean a need for reform to ensure long-term profitability and health.

Comcast CFO Mike Cavanagh on the call detailed restructuring charges taken this year. He said "COVID-related severance and restructuring charges" year-to-date have reached $239 million. "We expect to incur an additional charge that is approximately double this amount in this year’s fourth quarter as we continue to align the cost structure across all of our businesses," he added. That would mean around $478 million in the quarter and around $717 million for the whole year.

Shell also said the advertising upfront ended up being much smaller than in the past, but "much better" than expected for the company, with pricing slightly higher, instead of the expected decline, and ad volume being down slightly.

Cavanagh on Thursday's call also predicted that the theme parks unit, which posted a third-quarter loss just like in the previous quarter, would break even again some time in 2021 no matter what happens to Universal Studios Hollywood. Roberts said the division has seen "the most pressure" from the coronavirus pandemic and it will take some time to recover, but management remains "very bullish" on theme parks longer-term. He also highlighted that excluding theme parks losses, NBCU's earnings before interest, taxes, depreciation and amortization would have grown 9 percent in the third quarter.

The topic of premium VOD and theatrical film releases, which has been a key issue on recent Comcast earnings calls, only came up in passing on Thursday. Cavanagh mentioned that NBCU's film team plans to release The Croods: A New Age in theaters and on PVOD in the fourth quarter, while other movies have been pushed to 2021.

Shell previously addressed Universal Pictures' historic agreement with cinema giant AMC Theatres, which will allow the studio's movies to be made available on premium video-on-demand after just 17 days of play in cinemas, including three weekends. The deal, which initially covers AMC's U.S. locations, shatters the traditional theatrical window of nearly three months before studios can make movies available in the home. AMC, the world's largest theater chain, is expected to share in the revenue from PVOD. "Together we can build a new, more attractive business model for us both," Shell said this summer. He also signaled Universal was expecting to reach similar deals with other exhibitors.

Shell also said back then that in recent years it has become "increasingly more difficult" to get the same returns on movies over the first two windows, with the AMC deal helping the studio and the exhibitor on that front.