Comcast sheds pay TV subscribers as Peacock gains in Q4

Comcast on Thursday reported continued declines for its legacy video business in the fourth quarter, while its Peacock streaming service saw subscriber and revenue gains in the period. But as consumers connect more devices and TV viewing continues be splintered across different platforms, apps and modes of distribution, Comcast sees itself as well positioned to bring various video elements together to serve customers and partners and help grow its business, executives indicated Thursday.

This was the sentiment Comcast CEO Brian Roberts expressed when asked by investment analysts during its fourth quarter and full year 2023 earnings call Thursday about the company’s long-term strategy for video.

The focus for Peacock is building up scale in the U.S. and leveraging its existing media assets, but Roberts noted Comcast continues to be a big player with video distribution on the NBCUniversal side, with its own content from NBC, as well as a strong partner in reach through broadband operations on the traditional linear side. Simultaneously, he said it’s seeing a lot of collaboration with streaming partners who want to reach the operator’s large broadband base. And there it sees the X1 and Xumo platforms (the latter now also available to Charter customers) as “a natural point of engagement with them, aggregating content and acquiring new content if they don’t have it,” where Comcast has a role to play in the OS space as well.

“When you think about the overall video approach, it’s linear, streaming, on-demand…DVR, it’s all of them that I think we are in a unique position to be able to tie together,” Comcast Cable CEO Dave Watson added.

Watson pointed to the recent NFL Wild Card playoff game between the Kansas City Chiefs and Miami Dolphins that was exclusively streamed on Peacock, where its broadband, streaming, distribution and platform products could work together.

“It’s an example of great broadband being able to handle it there and at the same time, what’s really important in video is the experience matters,” he said, adding that includes getting connected, overall network performance and being able to easily and simply find what to watch and engage “So that the platforms that we’ve built over time, starting with X1, now Xumo, very important to us in the long run.”

In terms of the NFL playoff game, Comcast previously disclosed nearly 23 million viewers and 16.3 million concurrent devices. The company hasn’t yet said how the game impacted subscriber additions for Peacock but on Thursday Comcast President Mike Cavanagh said it expects to see an increase in paid subscribers and is currently focused on keeping those that came in around game time. In an effort to get new users to stick around and existing subscribers to reengage with the service beyond football action, during the event Peacock teased a lot of the platform’s content including Oppenheimer joining next month, the upcoming Summer Olympics and Peacock originals. And it looks to have worked at least short-term.

“Happy to report that we’ve seen record levels of hours viewed in the days that followed the Wild Card game itself,” Cavanagh said. That includes the release of comedy series "Ted," which he said has become the most-watched original Peacock series in its first seven on the platform, as well as the second season of "The Traitors" – which premiered right after the game and is the biggest original reality season launch for Peacock in its first four days on the platform.

Comcast’s traditional linear video business, meanwhile, has taken a back seat to other connectivity services like broadband and mobile, and continued to be challenged and shrink in the fourth quarter. Comcast lost 389,000 net domestic video subscribers in Q4, compared to a loss of 440,000 a year ago and the 490,000 net video subs it shed in Q3. It leaves Comcast’s traditional video base at 14.1 million. Video revenue was down 5.1% from a year prior, driven by continued customer losses, but still generated $6.9 billion in the period.

Comcast CFO Jason Armstrong reiterated the company’s strategy is to invest to drive growth in core connectivity business like broadband and mobile, while managing businesses that are valuable but still face secular headwinds – i.e., traditional video. He noted margins for the domestic legacy cable business improved 70 basis points to 46.2%.

Peacock, meanwhile, continues to add subscribers, ending 2023 with 31 million. Peacock added 10 million since the end of 2022, year including 3 million paid net adds in Q4. Peacock is generating around $10 in monthly ARPU. The streaming service recorded 57% year over year revenue growth in Q4 to surpass the $1 billion quarterly revenue threshold for the first time. Excluding the World Cup, Peacock advertising revenue was up 50% to reach $422 million in Q4, and totaled $1.4 billion for the full year. Subscription revenue grew to $522 million in the period. Still, programming costs reached nearly $1.4 billion for the period and over $4.4 billion for the full year. Overall, the streaming service clocked $2.7 billion in losses for 2023, including an adjusted EBITDA loss of $825 million for the fourth quarter. The fourth quarter losses improved year over year but represented the highest levels for 2023. Executives expect 2023 to be the year of peak losses for Peacock, with improvements projected during 2024.

And while Comcast works to build a profitable streaming business, Cavanagh said it will continue to follow a strategy of managing Peacock and its NBCU linear TV businesses as one, suggesting this helps drive financial improvement. That includes following the playbook of leveraging existing assets such as news and sports with NBC, entertainment like Bravo and other cable channel assets, along with studio content from Universal and the pay 1 window, on Peacock.

Putting it all together, it’s meant to “drive more scale, more subs, but also…get more engagement with the subs we have and drive improvements in churn, which we’ve been pretty pleased with,” Cavanagh said.

Asked by analysts about incremental investment still needed as it works to get the streaming business to profitably, he acknowledged there would be some “leveling off” on programming spend to help improve Peacock losses. However, Cavanagh emphasized a more holistic view, saying “I’m less focused on what standalone Peacock losses are doing than I am on doing what’s right for the long-term for the totality of the media business, which is linear and streaming.”

In Q4 the media business segment saw total revenue growth of 3%, to $6.9 billion. Domestic advertising was down 6.9% to $2.6 billion and would’ve increased 2.7% excluding World Cup advertising from comparison. Media segment adjusted EBITDA was down 50% to $108 million.

Total Comcast revenue grew 2.3% in Q4 to $31.2 billion. Net income was up 78% to $3.2 billion and adjusted EBITDA was flat at about $8 billion.