Comcast says 2023 will see 'peak losses' for Peacock after losing $978M in Q4
As streaming losses accelerate across the media sector amid mounting competition and sky-high production costs, Comcast (CMCSA) said Thursday its Peacock service should experience "peak losses" this year.
"We believe 2023 will be peak losses for Peacock and from there, steadily improve," Comcast president Michael Cavanagh said during the company's fourth quarter earnings call on Thursday. The executive estimated losses will total about $3 billion this year after the streamer took a $978 million hit in the fourth quarter, compared to a loss of $559 million the same quarter last year.
"We spend quite a bit of money creating content so migrating some of that content as eyeballs move to a more streaming universe — we like what we're doing," Cavanagh added. "We think Peacock is absolutely the right strategy for our company."
Comcast reported fourth quarter earnings that beat on both the top and bottom lines amid greater strength in its broadband and wireless business, in addition to higher advertising and studio unit revenues.
Revenue for the quarter grew to $30.55 billion versus the estimated $30.33 billion, while adjusted earnings per share (EPS) came in at $0.82 versus the expected $0.77, according to data from Bloomberg.
Yet Peacock's mounting losses overshadowed an otherwise upbeat report as adjusted EBITDA for NBCUniversal — which includes its TV and film studios, theme parks, and streaming divisions — decreased 36.3% to $817 million as a result.
We wouldn't be investing in Peacock if we didn't think it would return the segment to growth over time...Jeff Shell, NBCUniversal CEO
After a challenging 2022 for the industry, investors have zeroed in on how difficult it has been for media giants to reach streaming profitability.
Disney's (DIS) direct-to-consumer division lost a whopping $4 billion-plus in its fiscal 2022, which ended on Oct. 1. Meanwhile Paramount (PARA) told investors streaming losses would total about $1.8 billion in 2022 — higher than Wall Street expectations.
Warner Bros. Discovery (WBD), which has seen its market cap cut in half amid its messy restructuring efforts, reported free cash flow of negative $192 million in the third quarter, compared to $705 million in positive cash flow the year prior. The company now plans to take on $3.5 billion in content impairment and development write-offs by 2024.
Nevertheless, Comcast executives reiterated confidence in the economics of streaming, noting Peacock added 5 million subscribers in the quarter, its best quarterly result since the 2020 launch, fueled by live sports and the recent additions of new films and original content.
In total, Peacock subscribers surpassed 20 million at year-end, compared to less than 10 million a year ago, while its revenue nearly tripled to $2.1 billion.
"We made a decision to invest in Peacock. It's very clear we picked the right business model and it's very clear our content strength [is] paying off on Peacock," said NBCUniversal CEO Jeff Shell.
"We could not be more positive about our trajectory so far...we're right where we expected to be in investment," Shell added, explaining the investments made in Peacock were done in an effort to boost the overall media segment "which we feel more confident [about] today."
"We wouldn't be investing in Peacock if we didn't think it would return the segment to growth over time," he said. "The timing of that is up to market conditions."
Shell went on to explain certain variables including the ad market recovery, linear cable declines, and cost cuts within the linear segment could all impact that timeline.
The executive pointed to increased improvements within advertising, especially for categories like pharmacy, entertainment, and travel.
"The ad market feels to me like it's stabilized a bit," said Shell. "We're assuming it will stay weak for the first half of this year and then recover but who knows with this economy."
"We're doing better than our peers — Peacock growth is helping offset linear weakness which is fortuitous for us," he added.
Outside of streaming, NBCUniversal's theme park business continued to show strength with revenue increasing 12% year-over-year to $2.1 billion, primarily due to increased attendance and guest spending at the parks in the U.S. and Japan.
Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at email@example.com
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