Peacock Grows to 24 Million Subscribers as Comcast Beats Wall Street Expectations

The media conglomerate reported adjusted earnings of $1.13 per share on revenue of $30.5 billion for the second quarter of 2023

Comcast Earnings
Photo illustration by TheWrap

Peacock hit a total of 24 million paid subscribers during the second quarter of 2023 as Comcast beat Wall Street expectations.

The cable and media conglomerate reported adjusted net income for the quarter of $4.7 billion on Thursday, or $1.13 per share. Total revenue grew 1.5% year over year to $30.5 billion, while adjusted earnings before interest, taxes, depreciation and amortization grew 4.2% year over year to $10.2 billion.

Analysts surveyed by Zacks Investment Research expected the NBCUniversal parent to report earnings of 98 cents per share on revenue of $30.3 billion.

Peacock, which added 2 million paid subscribers during the quarter, posted revenue of $820 million, up from $444 million in the prior year period. But the streamer posted an adjusted EBITDA loss of $651 million, widening from $467 million a year ago. Comcast chief financial officer Jason Armstrong said there is “no change” to the company’s guidance that Peacock will hit peak losses of around $3 billion in 2023.

To help Peacock reach profitability, NBCUniversal is hiking prices on its Premium and Premium Plus subscription tiers to $5.99 and $11.99 per month respectively. Comcast president Mike Cavanagh added that the company is “not quite halfway through” its mission to convert Comcast subscribers over to a paying subscriber status on Peacock.

“When you look at the doubling of Peacock subs year over year, I’m optimistic about what the second half of the year brings feel pretty good about Peacock,” he said.

In Comcast’s Connectivity & Platforms segment, its cable business, adjusted EBITDA grew 4.4% year over year to $8.3 billion and revenue grew 0.1% year over year to $20.36 billion. Residential connectivity and platforms revenue fell 0.5% year over year to 18.06 billion, while business services connectivity revenue rose 4% year over year to 2.29 billion. 

Total customer relationships for the cable business decreased by 228,000 during the quarter to 52.3 million. Total domestic broadband customer decreased by 19,000 to 32.3 million and total domestic video customer dropped by 543,000 to 15 million. Meanwhile, total domestic wireless lines increased by 316,000 to 5.98 million.

In its Content & Experiences segment which includes media and theme parks, adjusted EBITDA climbed 7.5% to $2.2 billion and revenue jumped 4% year over year to $10.87 billion. Adjusted EBITDA in the Media division dropped 18.2% year over year to $1.24 billion, while revenue grew 0.1% year over year to 6.2 billion. Domestic advertising revenue slid 4.9% year over year to $2.03 billion, domestic distribution revenue climbed 2.2% year over year to $2.6 million and international networks revenue surged 6.7% year over year to $1.04 billion.

In its Studios segment, adjusted EBITDA increased to $255 million, while revenue decreased 0.9% year over year to $3.08 billion. Theatrical revenue soared 65.9% year over year to $913 million, driven by recent releases “The Super Mario Bros. Movie” and “Fast X,”while content licensing revenue fell 19.8% year over year to $1.82 billion, which was primarily due to the timing of when content was made available by its television studios under licensing agreements, partially offset by when content was made available by its film studios.

In its Theme Parks segment, adjusted EBITDA jumped 32% year over year to a record $833 million, reflecting growth at Universal Beijing, Universal Japan and Universal Hollywood compared to the prior year period, while revenue climbed 22.4% year over year to $2.21 billion, driven by higher revenue at its international theme parks.

The latest quarterly results come as legacy media is contending with a secular decline in linear television as cord-cutting continues to accelerate among consumers.

“Without a doubt, consumer trends such as cord cutting and new competitors, particularly from the technology sector, present challenges for us and we are facing an uncertain macro environment which continues to pressure linear advertising,” Cavanagh told analysts on the company’s earnings call. “But I firmly believe that we have the business strategy, management, depth and financial strength to emerge as long term winners and value creators as the landscape evolves at NBCUniversal and across the company.”

Comcast and its competitors are also facing a historic double strike from SAG-AFTRA and the Writers Guild of America.

“We remain committed to reaching a fair deal as soon as possible so we can get back to doing what we do best, which is making great content,” Cavanagh said.

When asked about the strike’s impact to free cash flow, Cavanagh noted that there is “nothing to quantify in the context of our company.” Comcast generated $3.4 billion in free cash flow during the second quarter.

“It’s all manageable but it will shift studio working capital out of the near term and into the future,” he added. “So probably for 2023 a little bit of lower working capital, higher free cash flow and the flip side of that in 2024.”

As for the impact to Peacock, he emphasized that the longer the strike goes on, the more of an effect it will have on the streamer and its competitors into 2024 and beyond. But he pointed out that the company feels “very good” about Peacock’s upcoming slate of content in the second half of 2023, which includes the NFL, “The Super Mario Bros. Movie,” “The Exorcist,” “Five Nights at Freddys” and the John Wick prequel series “The Continental.”  

Additionally, Cavanagh recently restructured the NBCUniversal leadership team, elevating Donna Langley to NBCUniversal Studio Group chairman and chief content officer and Mark Lazarus to NBCUniversal Media chairman.

The promotions, which are designed to streamline the network’s operations, prompted the departure of top TV executive Susan Rovner and followed the abrupt firing of CEO Jeff Shell in April and the exit of NBCUniversal sales chief Linda Yaccarino in May.

“I could not be more impressed with the depth of talent and particularly with our leadership team and I am very confident that the new streamlined organization we have just put in place and which has been very well received will help us move even faster and make even better decisions,” Cavanagh said.

Despite the executive shakeup, NBCUniversal has no plans to rethink its current content strategy.

“We are going to obviously be very much focused on creating great content, but we already do create great content, I think when you look at the movie slates we’ve had and the TV that we produce for ourselves and others, and I think that strategy is going to continue,” Cavanagh said. “We’re not going to be creating content exclusively for ourselves, but I think it’s a great advantage for our studios to actually have platforms that can take a substantial amount, though not all, of the content that we can create, which puts us in a great position to work with all sorts of talent and creators in Hollywood and elsewhere can come work with our great leadership in our studios, and we help bring their ideas to life.”

“In terms of cost and strategy and so forth, we will work in the context of the industry and the buyers and what they’re looking for and be responsive to that,” he added. “But I feel very, very good about the way our studio businesses are set up.”

Shares of Comcast climbed as much as 3% in pre-market trading on Thursday following the earnings announcement. On a year to date basis, Comcast stock is up 20.6%.