Comcast Corporation reported results for the quarter ended in March 2024. As it exceeded earnings forecasts, Peacock reduced its streaming deficit to $639 million in the first quarter of 2024, with paid subscribers increasing by 55% year over year to 34 million. However, as the media group lost more pay TV and broadband customers, its stock fell more than 6%.
The media conglomerate had a 1.2% increase in revenue to $30.1 billion and 13.9% bump in adjusted earnings to $1.04 per share, but higher programming costs at the streamer and operating expenses at its theme parks tempered the overall results. The company’s adjusted EBITDA went down 0.6% year over year to $9.35 billion. Moreover, it generated free cash flow of $4.5 billion and net cash of $7.8 billion during the quarter, up 19.4% and 8.6% year over year, respectively. It paid dividends totaling $1.2 billion and repurchased 56 million of its shares for $2.4 billion, resulting in a total return of capital to shareholders of $3.6 billion.
“We have a clear vision for how we’re going to compete now and into the future, combined with a sharp focus on execution,” Comcast President, Mike Cavanagh, told analysts. “Equally important, our disciplined capital allocation strategy, coupled with our strong balance sheet puts us in an enviable position relative to our peers to invest organically and aggressively in our six scaled and diverse growth.”
Cavanagh explained that the NBCUniversal parent’s residential broadband, wireless business services, theme parks, studios and streaming units comprise over 55% of total revenue and “will only grow over time.”
During the quarter, Peacock added 3 million subscribers. Its narrowed loss of $639 million in the first quarter followed peak losses of $2.7 billion in 2023. The company had previously stated that it expected Peacock to have a “meaningful improvement” in losses in 2024. The service’s average revenue per user is around $10 and its adjusted EBITDA loss narrowed to $639 million from $704 million in the prior year period, and its revenue grew 54% year over year to $1.1 billion, compared to $685 million a year ago.
Cavanagh said: “We added and then retained even more new Peacock subscribers than we expected. Overall, people are staying with us to engage in a broad range of content, spending 90% of their time on the platform viewing non-sports programming. Looking ahead, our content offering provides such a great value proposition that we should have some real pricing power over time.”
Moreover, according to data from Parrot Analytics, one major opportunity for improvement for Peacock remains its demand for streaming originals. The platform is still in 8th place in originals. Peacock’s originals demand share steadily grew from 0.9% in Q4 2020 to 3.9% in Q3 2023 with U.S. audiences. For the last two quarters, Peacock has hit 3.8%, showing that originals growing has plateaued. Original content is highly expensive to produce, but successful originals directly drive subscriber acquisition. Comcast must decide if it wants Peacock to be a contender in streaming originals, or focus on live sports and exclusive content from its linear channels.
Comcast’s Connectivity & Platforms segment reported adjusted EBITDA of $8.2 billion and revenue of $20.26 billion, up 1.5% and 0.6% year over year, respectively. Video revenue fell 6.9% year over year to $6.87 billion as the company continued to bleed subscribers from cord-cutting. Domestic broadband revenue grew 3.9% year over year to $6.6 billion, driven by a 4.2% increase in the average rate per customer. Domestic wireless revenue grew 13.3% to $972 million due to a 21% increase in the number of customer lines to 6.9 million.
Advertising revenue grew 4.9% to $951 million, due to higher domestic political advertising, higher revenue from its advanced advertising business and the positive impact of foreign currency, partially offset by lower domestic advertising. The company’s upcoming coverage of the Olympics is on track to generate the most advertising revenue in history with $1.2 billion in ad sales commitments.
The division lost 487,000 video customers for a total of 13.6 million and 65,000 domestic broadband customers for a total of 32.2 million, but gained 289,000 wireless subscribers during the quarter for a total of 6.87 million. Total customer relationships decreased by 166,000 to 52 million. Mike Cavanagh commented: “The broadband market remains extremely competitive, particularly within the market for more price conscious consumers. We continue to be intensely focused on segmentation, providing customers with options that meet both their lifestyle and budget.”
The Content & Experiences segment, which includes media, studios and theme parks, saw revenue grow 1.1% year over year to $10.37 billion and adjusted EBITDA fell 7.1% year over year to $1.49 billion. The media division, which includes Peacock, saw revenue grow 3.6% year over year to $6.37 billion, primarily due to higher domestic distribution revenue, and adjusted EBITDA fell 6.1% year over year to $827 million, driven by higher programming expenses at Peacock. Domestic advertising revenue was flat at $2.025 billion, while domestic distribution revenue grew 7.2% to $2.9 billion and international networks revenue grew 1.3% to $1.02 billion.
“As we look forward to the second half of the year we will have a substantial amount of acquisition oriented content lined up,” Chief Financial Officer, Jason Armstrong, stated. “This year is expected to be driven by the Olympics this summer, and the NFL and Big 10 returning in the fall, in addition to the steady stream of films landing on our pay one window, as well as upcoming originals.”
The studios division saw its revenue fall 7.2% to $2.7 billion due to a 10.4% drop in content licensing revenue to $2.1 billion, primarily reflecting the timing of when content was made available by its film studios. Adjusted EBITDA fell 12.2% to $244 million due to lower revenue, which more than offset lower operating expenses.
Theatrical revenue increased 3.4% to $330 million due to the successful performance of recent releases, including “Kung Fu Panda 4” and “Migration,: compared to theatrical releases in the prior year period, including “Puss in Boots: The Last Wish” and “M3GAN”. “For the third year in a row, we will release more movies than any other major studio,” explained Cavanagh. Upcoming films include “The Fall Guy” in May, “Despicable Me 4” and “Twisters” in July and “Wicked” in November.
The theme park division saw revenue rise 1.5% to $1.97 billion, led by higher revenue at its domestic theme parks, and adjusted EBITDA fall 3.9% to $632 million, reflecting higher operating expenses due to higher marketing and promotion costs and the negative impact of foreign currency. On this area, Cavanagh mentioned: “We started to feel some pressure on attendance levels late in the first quarter, which tends to occur in tandem with the ebbs and flows of new attractions in the market. Right now, we happen to be lapping the multi-year surge in attendance from our opening of new attractions in prior periods.”
Looking ahead, Comcast remains confident about the longer-term growth opportunities in its parks business as it prepares to open its Epic Universe theme park in 2025, which will feature three new hotels, five immersive worlds and more than 50 attractions, entertainment, dining and shopping experiences.
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