Comcast’s NBCU adds 4M Peacock subscribers in Q3, pegs sports eventual shift to streaming

Comcast executives on Thursday pegged sports as an element of multiple business strategies, and while it expects broadcast to continue to deliver reach for now, the company is preparing for an anticipated shift of all sports to streaming.

During the company’s third-quarter earnings call Comcast President Michael Cavanagh emphasized a commitment to sports, but suggested the move to streaming won't be immediate. He noted the significance of the commitment to sports for Comcast in the context of its Peacock SVOD is “combined with the ability to bring the big reach that our broadcaster NBC brings to the party,” which he said will continue to be important for a while.

“While sports over the long-term I think are going to be experienced significantly through streaming, I think for a long time the economics of sports rights that you see is going to be substantially supported by broadcast reach,” he commented.

Comcast CEO Brian Roberts said they believe the company has somewhat of a unique ability to help leagues get maximum engagement now with broadcast and cable, while keeping an eye on the future in building up a robust streaming service with Peacock.

“At the highest level we’re creating the digital capability on Peacock in the most relevant content. That looks like a very winning combination for us as a strategy,” Roberts said.

Roberts noted the breadth of live sports and capabilities on Peacock, and while declining to speculate on the future of linear networks like ESPN, he said it sets Comcast up for being relevant in a transition of sports going from analog to digital “in a way that helps the leagues.”

Executives also expressed excitement over sports streaming as it relates to the company’s broadband network strategy. Comcast sees its broadband network investments supporting increased bandwidth needs that coincide with growth in data usage on the back of an accelerated shift of sports viewing to streaming.

A big part of the broadband and Peacock strategy “is a commitment and a belief that we see all sports finding a way, over the next many years, or may not so many years, to be more and more streamed,” Cavanagh said. “And that’s going to require more bandwidth, and that’s going to require and create an opportunity for us to have the superior product in the market.”

In opening comments on the earnings call, he noted that the change of just a single NFL game – with Thursday Night Football on Amazon Prime Video -  moved peak broadband network data usage from Sunday night to Thursday night. That game comprises roughly 25% of all internet traffic on Thursday nights, according to Cavanagh.

“Every internet service provider, fixed wireless in particular, will really be put to the test as this transition of sports to streaming continues. Especially come January, when for the first time ever an NFL playoff game will be aired exclusively on a streaming platform, which will be our very own Peacock,” he added.

And tying in its JV streaming platform efforts, Roberts said Comcast believes its EntertainmentOS – now part of the recently launched Xumo Stream Box – is the best way to consume sports content.

On the cable side of the house Comcast continued to lose video customers in Q3, shedding 490,000 net subscribers in the period. It’s better than the 561,000 it lost in the same period a year ago. Comcast’s traditional pay TV subscriber base now stands at just under 14.5 million. Traditional video still contributed $7.2 billion to its connectivity business, but video revenue was down 3.7% year over year.

Earlier this month Comcast and Charter through their Xumo joint venture debuted the Xumo Stream Box streaming platform, which is a retail product that will also be offered to Spectrum and Xfinity customers. Asked by investment analysts if it will be a meaningful part of the connectivity and platforms business, Roberts pointed to the EntertainmentOS operating system as “the heart and soul” – with the system, built off of the X1 platform, which is already employed by other operators in Canada as well as Cox in the U.S. and Sky in the U.K.

Just last week Mediacom signed on to offer the Xumo Stream Box to its broadband customers.

He pointed to easing customer frustration with viewing fragmentation and Xumo as a way to “do the heavy lifting” of rebundling through one platform as consumers bounce between services – whether users subscribe to traditional pay TV services or not.

“Most of our sales now are broadband only, we want to make sure we are the best aggregator for streaming. And then a logical next step will be us or others beginning to try to make it even easier for customer to purchase and to switch packages,” Roberts said.

Peacock grows subs, trims losses

As for Peacock, which is part of the larger NBCUniversal media segment that includes broadcast and cable networks, Comcast reported revenue and subscriber gains in a period where it also trimmed losses.

Peacock added 4 million net paid subscribers in Q3, bringing its base to 28 million, compared to 16 million a year ago. As in Q2, the company attributed some subscriber growth to conversions of Comcast Xfinity customers that previously got the service for free to paid subscribers. It also marked organic sub growth attributed to programming, including the start of the NFL season and having the Big Ten for the first time, as well as Super Mario Brothers movie landing exclusively on Peacock.

In Q3 Peacock contributed $803 million of revenue – a 64% year over year increase - alongside an adjusted EBITDA loss of $565 million. Both financial metrics improved compared to $506 million of revenue and Adjusted EBITDA loss of $614 million in the same period a year ago.

Comcast still expects 2023 to be the year for peak Peacock losses, but lowered expectations for full-year to $2.8 billion, down from the original outlook that pegged losses at $3 billion for the year.

The company said growth at Peacock helped offset losses in its linear business, though the advertising market remained soft in the period. Revenue in its media segment was roughly flat at $6 billion, driven by international networks and domestic distribution. Domestic distribution revenue of $2.6 billion was up 3.8% driven by revenue growth at Peacock thanks to more paid subscribers. Domestic advertising overall was down 8.4% to $1.9 billion, with the company reporting Peacock gains as partially offsetting lower ad revenue at challenged linear networks.

In Q3 Peacock generated $355 million in ad revenue and $420 million in distribution revenue. Total media segment operating expenses were also flat around $5.3 billion, reflecting higher programming costs at Peacock and costs for sports programming.

Total revenue for NBCU’s Content & Experiences business was up 0.8% to $10.5 billion, boosted primarily by gains at theme parks. Content and experiences Adjusted EBITDA increased 10% to $1.97 billion.

In Q3 Comcast’s consolidated revenue was up about 1% to $30.1 billion while adjusted EBITDA grew 5.1% to $10 billion.