Peacock Hits 33 Million Sign-Ups, NBCU Earnings Drop Despite Higher Film Profit

Peacock Xfinity Preview - Press Materials - COMCAST Publicity - H 2020
Courtesy of Comcast

Comcast and its entertainment unit NBCUniversal report fourth-quarter and 2020 results.

NBCUniversal streaming service Peacock has reached 33 million sign-ups, parent company Comcast said on Thursday in its latest earnings update.

NBCUniversal CEO Jeff Shell had told an investor conference in early December that streamer Peacock had exceeded 26 million sign-ups at that time. Comcast had in its previous quarterly earnings report mentioned nearly 22 million sign-ups.

"Peacock has had an exceptional start," exceeding all internal targets, Comcast chairman and CEO Brian Roberts said on the earnings conference call. He said "momentum has further accelerated" with the addition of The Office to the streamer this month, which was "driving incremental users" to the platform. He also lauded such originals as Saved by the Bell, sports and library content, such as Parks & Recreation.

Shell offered, without sharing any further data, that Peacock usage of the show was "actually higher than we think the usage was among Netflix customers."

Roberts also lauded Peacock's appeal to "just about every demographic" and said it "an unbeatable consumer value."

Management said that Peacock revenue reached more than $100 million last year, but brought in a loss before interest, taxes, depreciation and amortization of $700 million given investments in the streamer. NBCUniversal continues to expect losses of $2 billion for Peacock for 2020 and 2021.

Management has said Peacock should reach 30 million to 35 million active users by 2024. Asked about that target on the call, Shell said the company wasn't ready to reframe any targets, but said the streamer was still "at the very beginning," and management "very confident the business model is exactly the right business model." He concluded with his take on the metrics so far exceeding the company's expectations, saying: "This steady growth is very promising."

Asked if a possible cancelation of the Tokyo Olympics would hurt Peacock's trajectory, Roberts said "I believe there will be an Olympics. I hope there will be an Olympics." He added that it can be done in various ways, including limited or no audiences. "We are very hopeful and believe they will find a way." He also called it "an amazing moment for the world to come back together." Shell added that advertisers were also looking forward to it.

Shell, 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 designed to shift resources and investment from linear to streaming, but also causing job cuts.

Comcast chairman and CEO Brian Roberts on Thursday's earnings conference call said the reorganization was designed "to drive long-term cost efficiencies and revenue opportunities." From the first quarter, the company will present combined financials for the merged broadcast and cable networks businesses along with Peacock. Shell said that will show that the combination "took a lot of cost out" of the business. Management sees its TV business "as a whole" and wants to "run it as one business" and "really grow the business over time," he said.

The cable giant on Thursday reported lower fourth-quarter financials for its entertainment arm NBCU, with adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) down 21 percent to $1.6 billion on an 18 percent revenue drop to $7.5 billion, as the coronavirus pandemic continued to weigh on its results, especially in its theme parks division, even though the firm lauded its Orlando and Osaka, Japan parks for reaching breakeven in the period. Its film and cable networks units recorded higher quarterly profits though.

Comcast on Thursday also said it added 538,000 net new broadband customers in its cable unit, up from 442,000 in the fourth quarter of 2019, while losing 248,000 video subscribers, up from 149,000 in the year-ago period.

"Encouragingly, Sky returned to customer growth in all three of its markets, bringing our total customer relationships and overall revenue in Europe essentially back to 2019 levels,"  Roberts highlighted. "With the vaccines rolling out throughout the world, we are optimistic that the parts of our business that had been most impacted will soon be back on a path towards growth."

And he added: "This confidence is shared by our board of directors, which has announced an increase in the dividend for the 13th consecutive year. In addition, it is now our expectation that we will be in a position to begin repurchasing shares again in the back half of this year." Concluded Roberts: "While this is certainly the most challenging period we have faced, I could not be more proud of how our management team and employees continue to pull together and deliver."

Comcast's stock rose in early trading.

NBCU's filmed entertainment unit revenue decreased 8.3 percent to $1.4 billion in the fourth quarter, "primarily reflecting lower theatrical revenue and other revenue, partially offset by higher content licensing revenue." Theatrical revenue fell 70.0 percent due to cinema closures as a result of COVID-19 and included the performance of The Croods: A New Age in the quarter. Content licensing revenue rose 22.7 percent, "driven by the performance of certain 2020 releases that were made available on premium video on demand, including The Croods: A New Age, as well as the timing of content provided under licensing agreements." Adjusted EBITDA increased 65.2 percent to $151 million thanks to lower operating costs due to the reduced number of releases  as a result of the pandemic.

Cable networks division revenue fell 6.4 percent to $2.7 billion in the latest quarter on lower content licensing and advertising revenue. Content licensing and other revenue decreased 37.9 percent due to the timing of content provided under licensing agreements, including a tough comparison with a big library deal in the fourth quarter of 2019. Advertising fell 4.2 percent, "reflecting continued ratings declines at our networks and reduced spending from advertisers related to the delayed start of some professional sports seasons due to COVID-19, partially offset by higher pricing," the firm said. Distribution revenue was nearly unchanged as a decline in subscribers was offset by contractual rate increases. The unit's adjusted EBITDA increased 22.4 percent to $1.3 billion, driven by lower programming and production expenses, mostly due to a reduced number of sporting events "resulting from the delayed start of some professional sports seasons due to COVID-19."

Fourth-quarter broadcast TV revenue fell 12.0% to $2.8 billion in the fourth quarter on lower content licensing revenue and a 9.6 percent advertising drop, partially offset by higher distribution revenue thanks to higher retransmission consent fees. Adjusted EBITDA fell 24.3 percent to $356 million as lower operating costs only partially offset the revenue decline.

Fourth-quarter theme parks revenue decreased 62.9 percent to $579 million in the fourth quarter, "primarily due to Universal Orlando Resort and Universal Studios Japan operating at limited capacity, while Universal Studios Hollywood remains closed as a result of COVID-19," the company said. Adjusted EBITDA swung to a loss of $15 million.

Comcast recently tapped Dana Strong as the new CEO of Sky where fourth-quarter revenue increased 3.3 percent to $5.2 billion. But higher costs and expenses led to a roughly 82 percent drop in adjusted EBITDA to $139 million.

On the company's earnings conference call, Roberts said that despite the pandemic "clearly, our company is strong."

Speaking of strong: Shell on Thursday's call explained why adding the WWE Network to Peacock was a "perfect" fit for the streamer. Thousands of hours of content  can now be offered on Peacock, which will be able to "enhance the brand of WWE," while monetizing the programming through advertising, Shell said. Plus, "we get the events that were behind the paywall that used to be pay-per-view to drive our $4.99 premium version of Peacock." He added that there was also the opportunity to cross-promote WWE Peacock content with the sports entertainment giant's shows on NBCUniversal's USA Network, while allowing marketers to buy ads across the platforms.

Comcast is also planning to flex its muscle by taking its Flex TV streaming device, currently only marketed to Comcast broadband subscribers, outside its cable markets, making it a national, potentially even an international, offering, executives said. The conglomerate is discussing "what are other opportunities" for the service, Roberts said. "We will have more to talk about" later in the year.

And Comcast Cable CEO David Watson called it "a long-term platform opportunity for us," saying: "Right now it is working great within the footprint, but we are building out plans beyond that."

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