Deeper Dive—Comcast gets serious about Peacock

Peacock landed in the middle of 2020 and has gotten off to a slow start. But now Comcast is giving it a big push toward growth and profitability.

Up until this week, Comcast’s updates on Peacock—its ad-supported streaming service—had largely consisted of total sign-ups and sometimes not even that. During its fourth-quarter earnings call, though, CEO Brian Roberts spent a considerable amount of time providing clarity on where Peacock is and where it’s going.

Peacock now has 24.5 million monthly active accounts (MAA) in the U.S. including more than 9 million paid subscribers primarily on the $5/month ad-supported tier, generating nearly $10 in average monthly revenue per user. The service also counts 7 million “highly engaged” Peacock Premium subscribers who get the service for free through Comcast Xfinity and other distributors, and Roberts expects a lot of them to convert to paying customers eventually. Peacock is also accelerating its international expansion, which should bring a lot more users to the platform.

More importantly, Comcast has pledged to double the content budget for Peacock this year to $3 billion, some of which will be reallocated from linear business. CFO Mike Cavanagh said that sum should rise to $5 billion annually over the next few years as NBCUniversal brings its content including pay one movie rights that currently belong to HBO.

Of course, higher investment in Peacock means losses will grow as well. The service lost $1.7 billion in 2021 and expects to lose $2.5 billion in 2022. But NBCUniversal CEO Jeff Shell suggested that Peacock will hit a peak investment year in 2023 and then start to see revenue growth outpace costs and produce a profit.

“The most important thing to keep in mind is that we’re playing a different game than our competitors. We really believe that Peacock is not a separate business for us; it’s an extension of our existing business,” said Shell during Thursday’s earnings call. “We are organized in our television business so that we run all of them together as one business and we program as one business, picking the right model for each of our pieces of content. We think over time that’s not just going to lead to good growth on Peacock but it’s going to lead to our TV business…returning to growth overall.”

Peacock has a hit in “Yellowstone” and it has the Winter Olympics and the Super Bowl coming up in February. The service seems to have some positive momentum and is finally putting in a concerted effort into growing its paid subscriber base, which is still surprisingly low after almost a year and a half. But it’s going to take a lot more money to turn Peacock into a contender, and MoffettNathanson analyst Craig Moffett doesn’t seem certain more spending will work.

“We’ve gotten some reassuring data about usage and engagement, but we also got a glimpse of the content spending that will be required to grow the business,” he wrote in a research note. “Our own view, for what it’s worth, is that a slower and less fevered (and less costly) build may be just as likely to succeed (or fail) as one that burns huge amounts of cash up front. That is, we’re not convinced at all that customers’ habits are close to getting locked in at this early stage.”