Premium VOD Film Releases Have Been "Helpful" Amid Pandemic, Says Comcast CFO

Comcast CFO Michael Cavanagh
Courtesy of Comcast

Comcast CFO Michael Cavanagh

But Universal is "eager to get our films back in cinemas," Michael Cavanagh tells the Credit Suisse 22nd Annual Virtual Communications Conference.

NBCUniversal owner Comcast is seeing its businesses amid the novel coronavirus pandemic trending in line with or "maybe a touch better" than forecast at the end of April, CFO Michael Cavanagh told an investor conference Tuesday.

"We are trending better" in advertising for each recent month, meaning "green shoots," but "no big changes" to TV advertising and the predicted big ad hit in the second quarter, he said.

He also addressed the dispute Universal Pictures has had with cinema operators about premium VOD, saying the format has been "constructive and helpful relative to what otherwise would have been the case for us" amid the virus crisis. He added that the company was "pleased" with the PVOD performance of The King of Staten Island following the success of Trolls World Tour.

"The sooner [cinemas can reopen after the pandemic lockdowns] the better for the exhibitor system," and that is the focus for studios and exhibitors, he said. Universal "will be eager to get our films back in cinemas," the Comcast CFO highlighted. But he also reiterated that it was "likely that for certain types of films there can be a constructive way" for consumers and all players in the film business to set up some films for PVOD releases. "I'd like to think there is a way to figure all that out," Cavanagh said, adding "it is a film-by-film issue" and "only a part of the long-term strategy." 

The Comcast CFO spoke at the Credit Suisse 22nd Annual Virtual Communications Conference in a session that was webcast.

He also addressed the reopening, with limited capacity, of NBCUniversal's theme parks, such as in Orlando, saying the firm was "pleased" to be back in business. The fact that the firm managed to reopen slightly before the end of the second quarter could mean its financial hit will end up "a touch" lower than previously guided, he said.

Cavanagh said the key question will now be when the firm can get its parks to the 20 percent to 30 percent range of "typical" attendance that is needed to break even.

Asked about the pandemic and the resulting recession and what they mean for Comcast's core cable systems, Cavanagh said Tuesday that they will "probably" accelerate cord-cutting trends.

Traditional pay TV is not the profit provider it once was, meaning Comcast now sees video as important in the sense that it is "a customer need, and because we are the broadband provider," Cavanagh reiterated past management comments. Emphasizing that the goal is to "not chase unprofitable video," he also again signaled that the company's focus is on strengthening the customer relationship via video offerings rather than on forcing certain types of bundles upon subscribers.

At the end of April, NBCUniversal CEO Jeff Shell and Roberts had addressed the industry debate about Universal's decision to break the theatrical window for Trolls World Tour amid the novel coronavirus pandemic and offer it in the premium VOD (PVOD) format.

Shell said that a majority of movies are currently being consumed at home, whether people like it or not, and it was "not realistic" for that to change right now, even though he said he expects theatrical is "someday again going to be the central element to our business," adding, that "is how people make their movies and how they expect the movies to be seen." The Trolls sequel was "ready to go," and the company had worked on it hard and spent a lot of money on it, and consumers "desperately needed" a family and kids offering.

He said the idea behind the PVOD offer was to "preserve the premium nature of movies," concluding: "I would expect that consumers are going to return to the theaters," and PVOD "will be part" of the film business as a "complementary" offer, "not a replacement." Cavanagh said at the time that while recent movies have had digital success, "we will determine our future distribution approach on a title-by-title basis."

At the end of April, Cavanagh said that TV advertising trends would "materially weaken" for NBCUniversal in the second quarter, partially offset by lower sports costs. He added that the theme parks unit would have a second-quarter loss of $500 million if parks remain closed throughout the quarter.

Comcast also recently launched a preview of the Peacock streaming service to millions of Comcast customers sheltering at home with access to a trove of 15,000 hours of TV shows and movies. NBCU executives are hoping that Peacock will thrive during its preview, even without some of its biggest draws, as customers will have to wait until after Peacock's July 15 wide launch to watch new originals like utopian drama Brave New World

"We are ahead of our internal [expectations] by a bit," Cavanagh said Tuesday about Peacock's early trends.