Comcast Earnings Beat Expectations Amid Shift to Streaming

As it takes the risk of transforming itself from a TV giant into a streaming start-up, the cable operator beat investors’ estimates in its first-quarter results.,

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If you want a clear picture of the state of the media industry in upheaval, Comcast offers a good snapshot.

The company, which includes NBC, Universal Pictures, several theme parks, and the Peacock streaming service, beat Wall Street’s expectations in its first-quarter earnings report on Thursday as it continued to shift its emphasis from cable to digital.

The numbers tell the story. At the end of March, Comcast had:

  • 19 million cable subscribers, a loss of 491,000 since December

  • 31 million broadband internet subscribers, a gain of 461,000

  • 42 million sign-ups to the streaming platform Peacock, a jump of 9 million.

Even as it lost customers, Comcast’s cable television business was still the company’s biggest source of revenue. It pulled in more than $5.62 billion in for the first quarter, a figure that was flat compared with last year, but still accounted for a fifth of all revenue.

Peacock, on the other hand, is the fastest growing unit, but it loses the most money. The streamer, which became widely available last summer, took in $91 million in revenue but saw a pretax loss of $277 million in the first quarter.

In 2020, Peacock’s pretax losses approached $700 million. This year, Comcast expects it to lose $1.3 billion as it spends big to load it up with original shows and sports programming with the aim of attracting more viewers.

That’s the operating thesis behind every major media company today: replace the eroding base of profit-rich cable customers with loss-making streaming viewers in the hope that over time the digital audience will become more valuable. The Walt Disney Company, ViacomCBS, Discovery Inc. and AT&T’s WarnerMedia are all trying to make the transformation without entirely losing their shirts. (Netflix is the rare company that makes real profit in streaming.)

Peacock’s 42 million sign-ups should also come with an asterisk. The service is free and easy to join, but that doesn’t mean everyone is watching. (The figure includes paid versions of Peacock, which feature more content and fewer commercials.) The company said about a third, or 14 million, use the service regularly each month.

“With Peacock we’ve created great options,” Brian Roberts, the chief executive, said on a call after the earnings report. He said customers were watching 20 percent more “programming hours” each month, and he saw opportunities to expand overseas. The streamer also garners higher ad rates than the company’s broadcast and cable networks.

Peacock offers some of the most popular streaming shows, including “The Office,” a top hit on Netflix before the rights to the show returned to Comcast. In March, the service added the hugely popular WWE wrestling.

In a few years, Peacock will have the rights to stream National Football League games on Sunday alongside NBC. That could ruffle feathers with some of NBC’s affiliate stations if viewers drop TV and opt for Peacock to watch football. The streamer will also have some games exclusively.

Peacock can also act as a hedge against other cable operators such as Charter or Cox when Comcast’s media division, NBCUniversal, negotiates carriage fees.

Comcast also sells something that has proved more durable than sports and entertainment: broadband, the piping that carries all streaming platforms. In the first quarter, sales increased 12 percent, to $5.6 billion. It’s likely to overtake cable television as the company’s biggest business.

Mr. Roberts highlighted the company’s plans to offer increased speeds that could exceed multiple gigabits a second, several times faster than the current benchmark. “The robustness of our network in the U.S. speaks to how we’ve positioned ourselves to compete against other providers,” he said.

Comcast tends to see itself as a technology company first and a media concern second. Even Peacock is seen as an extension of its broadband business.

At NBCUniversal, sales sharply dropped as movie theaters remained mostly shuttered and fewer people were visiting the Universal Orlando Resort and other company theme parks because of the pandemic. Revenue fell 9 percent, to $7 billion, and pretax profit decreased 12 percent, to $1.5 billion. Advertising at its television networks, which include NBC, MSNBC and Syfy, fell 3.4 percent, to $2.1 billion.

Jeff Shell, the head of NBCUniversal, has instituted a series of cost-cutting measures since he took over in January 2020, an effort hastened by the pandemic. That has helped maintain profits, even as revenues dropped. The theme parks division was the hardest hit, losing $61 million in the quarter. The company said it expected the business to pick up in the summer.

Overall, Comcast beat expectations, reporting adjusted profit of 76 cents a share on $27.2 billion in revenue, and its stock was climbing on Thursday morning. Investors had been looking for 59 cents in per-share profit and $26.6 billion in sales.

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