- Comcast reported an adjusted profit of $3.71 billion, or $1.04 per share, on revenue of $29.94 billion, beating Wall Street expectations of a profit of 97 cents per share on revenue of $29.26 billion.
- The media segment grew revenue 25.3% and profits 3.7%, driven by higher domestic advertising and distribution revenue, the FIFA World Cup, the NBA playoffs and “Love Island USA.”
- Comcast shed 167,000 broadband customers and 280,000 video customers as cord-cutting and competition continue to weigh on its business
Six years after launch, Peacock has finally turned the corner of profitability. But the NBCUniversal-owned streamer still has a long road ahead as the studio prepares to split from parent company Comcast in the next 12 months.
Peacock reported its first-ever quarterly profit of $189 million during Comcast’s second quarter on Thursday, swinging from a loss of $101 million in the prior-year period, while revenue grew to $1.9 billion, compared to $1.2 billion in the year-ago period. It also added 2 million paid subscribers for a total of 48 million, driven by the NBA playoffs, FIFA World Cup and “Love Island USA.”
Comcast Co-CEO Mike Cavanagh touted the results as “important evidence” that the company is “managing event-driven churn effectively by bringing users in around major moments and keeping them engaged with the broader content slate.” But he warned Peacock’s profitability going forward would vary from quarter to quarter, based on the timing of sports schedules and other content.
“Think of it on an annual basis rather than the lumpiness quarter by quarter,” he told analysts. “It’s been improving steadily and we see that continuing to be the case.”
The profitability milestone comes as the media conglomerate plans to separate NBCUniversal and Sky into a separate, publicly-traded company over the next 12 months. Under the terms of the split, Comcast will continue to have an ownership stake of up to 19.9% in NBCU/Sky for up to one year after the tax-free spin’s completion.
The content and experiences business, which includes NBCUniversal, Sky and its Universal theme parks, grew total revenue 22.9% to $10.73 billion, while profits climbed 7.1% to $1.33 billion. In comparison, Comcast’s connectivity and platforms business saw revenue fall 3% to $19.8 billion and profits tumble 5.8% to $7.96 billion as the company continued to shed broadband and video customers.
“With the combined reach of NBC, Peacock, Telemundo, Bravo, Sky, and possibly ITV, and the many relationships we’ve built with partners across tech and streaming, we will be well positioned as an independent media company to drive engagement and growth,” Comcast co-CEO Brian Roberts said. “We’ve spent years investing to build these two great companies, each with distinct world-class assets and leaders I trust deeply. This structure gives both companies the freedom to pursue the priorities that matter most to their futures. There’s a lot of work ahead and we’re moving with real urgency.”
Despite continued challenges in the linear TV business and the threat of media consolidation, Roberts said Comcast is “more optimistic than ever about the next wave of innovation.”
“One thing is clear: AI and the coming generation of technology will demand more data, more bandwidth, lower latency, and smarter networks and platforms will bring together connectivity, entertainment, and new experiences in ways we are only beginning to see. And that is exactly where Comcast is built to lead,” he continued. “The market is moving to our strengths, and winning now is about focus, speed, and relentless execution.”
Shares of Comcast fell 1.23% on Thursday following the results. In addition to the results, the company reported a quarterly cash dividend of 33 cents per share, payable on Oct. 28 to shareholders of record as of Oct. 7.
FIFA World Cup, NBA Playoffs and ‘Love Island USA’ boost NBCUniversal ahead of split
Overall, the media segment grew revenue 25.3% to $5.7 billion, while profits rose 3.7% to $708 million, driven by higher domestic advertising and distribution revenue and the FIFA World Cup. When excluding the World Cup, revenue grew 15.6% to $5.3 billion.
“The NBA, Love Island, and the World Cup are all contributing to strong engagement and robust ad sales across both linear and streaming,” Cavanagh said. “The World Cup has been terrific for us, delivering the biggest Spanish-language sporting event in U.S. media history and record engagement for Telemundo and Peacock, and Love Island has been the number one overall streaming title in the U.S. this summer.”
While some investors view the split as a move to drum up sale interest, Cavanagh insisted that standalone NBCU/Sky has the heft, relationships and operational capabilities to remain a major independent player. He reiterated that it would invest in the growth opportunities within its own businesses, as well as the spaces around them where it has “the right to play.”
“Our approach is to build great businesses that serve our own platforms, but look for opportunities to partner, bundle, and exhibit other people’s IP in our parks and create IP in our studios that go to other platforms,” he said. “I think that’s a good strategy for the collection of assets we have and I think presents a path for growth in this business over time.”
Notably, Sky has entered into a $2.1 billion deal to acquire ITV’s media and entertainment business, which includes its linear channels and the ITVX streaming platform, as well as “The Great British Bake Off” producer Love Productions.
Under the terms of the deal, Sky News and ITV News will stay editorially distinct going forward. It also includes $1.6 billion in cash and up to $267 million in performance-related earn-out and $2.8 billion in content spend with ITV Studios, which will remain a separate entity, over the next five years. Approximately $267 million in annual cost savings are expected to be generated on a run-rate basis by the end of the third year after the deal’s closing.
In addition to creating operating efficiencies, Cavanagh said the move would enhance Sky’s streaming and advertising capabilities and grow customer relationships. ITV reaches 40 million people in the UK every week and serves more than 16.5 million digital users.
‘The Super Mario Galaxy Movie,’ ‘Obsession’ and ‘Michael’ drive studios growth
The studios business also posted strong results, reporting a profit of $202 million as revenue grew 25% to $3.04 billion, driven by higher theatrical revenue from “The Super Mario Galaxy Movie,” “Obsession” and the international distribution of “Michael.”
“The Super Mario Galaxy Movie” has grossed over $1 billion in worldwide box office year to date, pushing the franchise’s cumulative total past $2 billion. Meanwhile, “Obsession” is Focus Features’ highest-grossing film in history with over $400 million in worldwide box office year-to-date. .
Comcast’s theatrical revenue for the quarter came in at $972 million, up from $284 million a year ago. Content licensing revenue was $1.8 billion, down 0.3% from $1.81 billion a year ago, reflecting lower revenue for its film studios that was offset by higher licensing revenue at its television studios.
Theme parks business weighed down by attendance softness, higher operating expenses
As for the theme parks business, revenue increased 2.7% to $2.4 billion, driven primarily by its Orlando theme parks, including Epic Universe. But the segment’s profits fell 5.1% to $609 million due to higher operating expenses, attendance softness and lower international theme park revenues due to China-related travel restrictions and a “challenging macroeconomic backdrop” in Beijing.
“The operating environment has softened more than we anticipated. We believe there are some temporary factors at work, including higher fuel prices and weaker consumer sentiment, but we are watching these trends closely,” Cavanagh said. “Despite these near-term pressures, our outlook for the long-term opportunity in parks is unchanged.”
Looking ahead, Cavanagh acknowledged that attendance softness at its Orlando theme parks have bled into its third quarter results, and that results at Hollywood theme park will not meaningfully improve until the opening of its new Fast and Furious rollercoaster later this year. However, he expects the downward trend to eventually stabilize and touted a “long runway” for growth, citing the opening of its Universal Kids Resort in Frisco, Texas and progress towards construction on Universal’s new United Kingdom theme park.
Cord-cutting and competition continues to ravage broadband, pay TV businesses
Comcast lost 167,000 broadband customers and 280,000 video customers for a total of 28.49 million and 10.67 million, respectively. Video revenue fell 7.8% to $6.1 billion due to the subscriber losses, while ad revenue grew 1.1% to $962 million, boosted by higher domestic political advertising and advanced advertising revenues.
However, the broadband losses marked a year-over-year improvement of 34,000 as part of a strategic pivot made by the company almost a year ago, which has included pricing and packaging changes, continued investment in a simplified, more seamless customer experience and a more aggressive push into wireless. The latter continues to be a bright spot, adding 448,000 lines during the quarter for a total of 10.19 million.
When asked about Elon Musk’s Starlink, Comcast executives said that they don’t see it as a meaningful competitor, but noted that they’re not being complacent and fully expect to see them as more of a competitor over time in rural markets and underserved areas.
Despite the increasingly competitive market, executives expect the positive trends in its broadband and wireless business to continue. They predicted a “significant majority” of wireless customers would convert to paid relationships as roll-offs accelerate in the second half of the year.
“While this pivot comes with investment that is weighing on financial results in the near term, we are making real progress against the objectives we set out, which are to build a durable, converged customer base, deepen our relationships, and transform the experience so as to position this business for long-term growth,” Cavanagh said. “We are pleased with the progress we are making.”
Source: TheWrap
