Comcast Targets Return to “Total” Media Business Profit Even Amid Peacock Losses
NBCUniversal’s streaming service Peacock may be hitting peak losses in 2023, but the company is looking to get its broader media business to profit growth again, Comcast president Michael Cavanagh told an investor conference Wednesday.
Speaking at the Morgan Stanley Technology, Media and Telecom Conference in San Francisco in a session that was webcast, he spoke broadly about the firm’s media business.
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Peacock, the streaming service of Comcast entertainment unit NBCUniversal, ended 2022 with more than 20 million U.S. paid subscribers. Management said recently that full-year losses related to Peacock amounted to $2.5 billion in 2022, in line with guidance. It is expecting the loss to widen to around $3 billion this year. “As we have said before, we believe 2023 will be peak losses for Peacock, and from there [they will] steadily improve,” Cavanagh emphasized at the time.
In content, “our growth there is really all around Peacock,” he said Wednesday, noting $2 billion in revenue last year and reiterating that the streaming business expects to hit peak losses this year. “But we are very much looking at how to run the media businesses in total to get to a place in due course where the bottom line of the total business is a grower again.
“If we were sitting here three, four or five years ago, the prospect for the way the leaders were kind of running away with the prize with a belief in a business model that was of such a high degree of certainty that people were saying, ‘You guys got no shot,'” Cavanagh said. “I don’t think it’s so clear where that is all going. That speaks to [how] we got to manage our way through, there is a pivot in some of these businesses.” Overall, the Comcast president argued that the streaming space is “better set up to our strategy now than a few years ago.”
With the future of the Hulu partnership between Disney and Comcast being discussed widely these days, Cavanagh was asked if he sees Disney buying full control from Comcast next year or a different outcome: either NBCU acquiring Disney’s two-thirds stake in Hulu or maybe creating a new partnership. After all, Comcast can use a put option to require Disney to take over Comcast’s one-third stake, while Disney can tell Comcast to sell it its stake.
“Back in 2019, we put together a very clear and good agreement for a put call that does happen in early 2024,” the Comcast president said, without showing his hand. “So we know what that looks like. We are very happy with [that]; if that’s the way it plays out, that would be great. But if there is something different that comes along, we have to consider things, but … we won’t do something unless it’s better in our minds than that. And I’ll leave it there.”
Cavanagh also once again highlighted that Comcast is happy with its asset portfolio, meaning it feels no big urge to pursue any M&A, unless it makes real financial and strategic sense. “We don’t have to do anything,” he said. “So I think the bar is high for what we would be looking for. You never say never, because it is our job to consider everything that comes along. But I think it is different when you feel strategically incomplete.”
Asked about his broader thoughts on Comcast’s growth drivers in its media and entertainment businesses, Cavanagh said Wednesday that “we manage with a very long-time view” rather than short-term focus. “Us being an aggregator” and helping “people navigate” various streaming services remains an opportunity, he said. “The aggregate demand for entertainment, professionally produced high-quality video entertainment, is up, not down measured in hours consumed” despite the rise of social media and gaming “that has taken up a lot of share of people’s time, yet it hasn’t taken away.”
And in terms of live experiences, such as theme parks, demand has rebounded after the COVID pandemic, he noted. Theme parks is a “fantastic” business for NBCU with much growth upside left, he added. Overall, “the backdrop for growth is fantastic,” Cavanagh concluded.
The executive also argued that the company has top businesses in its focus areas, which is key to success. In entertainment, for example, NBC reaches 100 million viewers a month with its content, NBCUniversal’s film unit is “the number two studio,” and European pay TV giant Sky reaches millions of homes, he said.
NBCU CEO Jeff Shell said on the earnings conference call: “We feel really good about NBCU’s growth trajectory going forward.” With the 2023 film slate looking “really good,” and the company’s TV studios doing “great,” he concluded: “Our content business is doing great, and that is a business that should grow over time.”
Comcast promoted Cavanagh from his role as chief financial officer to the post of president in October. He is working closely with Comcast chairman and CEO Brian Roberts.
Cavanagh joined Philadelphia-headquartered Comcast as CFO in 2015. He was previously co-CEO of JPMorgan Chase’s corporate and investment bank from 2012 to 2014 after serving as JPMorgan Chase’s CFO for six years.
