Peacock continued to make gains for Comcast

Comcast announced its financial results for the second quarter of 2024. The company reported tough year-over-year comparisons for its film studio and theme parks. However, its streaming service, Peacock, continued to make gains. Comcast’s stock was down roughly 4% in early trading.

Net income was down 7.5% to roughly $3.93 billion, or $1 per share, compared with $4.25 billion, or $1.02 per share, in the same quarter last year. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, fell about 1% to $10.17 billion. The company’s revenue dropped nearly 3% to $29.69 billion compared with the same period last year. Revenue from the content and experiences segment, which includes the NBCUniversal TV business, theme parks and Universal Pictures, was down 7.5% to $10.06 billion.

Revenue for the Universal Pictures studio, in particular, fell 27% to $2.25 billion, facing a tough comparison with last year, when “Super Mario Bros.” and “Fast X” were released, one of Comcast’s best theatrical quarters ever. Comcast is looking ahead to the rest of the year’s film slate, including this summer’s box-office success “Despicable Me 4,” and “Twisters,” as well as the upcoming “Wicked” release in November.

“We grew Adjusted EPS high single digits and continued to invest aggressively in our businesses while returning $3.4 billion to shareholders," said Brian L. Roberts, Chairman and Chief Executive Officer of Comcast Corporation. "Broadband ARPU increased by 3.6% and we delivered 6% revenue growth in our connectivity businesses, while expanding our Adjusted EBITDA margin across Connectivity & Platforms to a record-high 41.9%. Media returned to Adjusted EBITDA growth, driven by Peacock, which delivered the best year-over-year improvement for any quarter since its launch in 2020. In Studios and Theme Parks, we faced difficult comparisons to last year, but our upcoming film and TV content and the debut of Epic Universe bode very well for the future. More broadly, I am excited about the growth opportunities ahead, as our teams innovate and collaborate to connect our customers, viewers and guests to the moments that matter. The Paris Summer Olympics is a perfect example of this, where starting this Friday our company will be leveraging our most advanced technology and expertise in storytelling to provide millions of households in the U.S. with the finest, most expansive television and streaming coverage in media history for an Olympics or perhaps any televised event… and even more important, an experience they hopefully will never forget."

According to Parrot Analytics, the upcoming Paris Summer Olympics may drive record sign-ups to Peacock, but the real work for NBCUniversal starts after the closing ceremony, and that is keeping those new subscribers on the platform long term. Peacock will once again stream NBC’s Sunday Night Football, the #1 primetime TV show for 13 years in a row. On top of that, NBC is set to become a partner in the new NBA rights deal, barring potential legal shenanigans. Peacock will get a significant slice of those games, running from the Fall until late Spring. Continuous sports content — from the Premier League to college sports, the PGA Tour, and more — will help Peacock in two crucial areas by reducing churn, and increasing ad revenue.

Legacy linear content will also form another part of the puzzle. Some of the most in-demand series on Peacock in Q2 2024 included “The Voice,” “Brooklyn Nine-Nine,” and “Law & Order: SVU.” These are the long-running series with hundreds of episodes that keep audiences on the platform for longer, making them less likely to unsubscribe. After lagging for years in seventh place among major streamers in total on-platform demand share — accounting for all TV shows and movies, licensed and original — Peacock has firmly established itself ahead of Paramount+, and is even closing the gap with Disney+ in this category.

While the biggest hits will always be strong growth drivers, streaming originals on average drive a fraction of the overall demand for most streamers, showing why legacy companies are pivoting back to licensing deals for their legacy content. Peacock has successfully leveraged its strong line up of linear programming — including next-day NBC content, and of course Bravo’s popular reality franchises such as “The Real Housewives.” Broadcast series in particular over-index with Peacock’s TV slate. They account for 36.9% of the demand, and only 13.3% of the supply. For comparison, Peacock’s streaming originals drive 13.8% of the demand, but account for 16.0% of supply. NBCUniversal should take this into account when establishing future licensing strategies.

According to Parrot, Warner Bros. Discovery CEO David Zaslav effectively put all options on the table for his company earlier this month. Comcast may be the best positioned company to acquire WBD, or spin off NBCU to merge with WBD as a separate entity. This hypothetical marriage of convenience makes sense from a scale perspective. It would surpass Disney as the top media company by corporate demand share, and a complete combination of Max and Peacock could jump ahead of Netflix in total catalog demand share. Any action before 2025 is unlikely, but WBD’s lack of a broadcast network already makes this more palatable than other potential deals.

One major hurdle will inevitably be CNN. It’s hard to imagine CNN and MSNBC/NBC News all under the same umbrella. Industry estimates put a spun-out CNN worth mid-ten figures. Zaslav views himself as a peer to Comcast CEO Brian Roberts, making the executive structure of a future company a delicate matter. Roberts has made high profile bids for Disney and Fox in the past, so it is not farfetched for him to attempt a similar play given Zaslav’s recent comments.