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Peacock Finally Crossed 20 Million Subscribers — with ‘Enormous’ Losses

The NBCUniversal streaming service racked up nearly $1 billion in Q4 costs, and management warns expenses are yet to peak.

"Halloween Ends"

“Halloween Ends”

Ryan Green/Universal Pictures

Peacock crossed 20 million paying subscribers in the U.S. in the final quarter of 2022, Comcast reported on Thursday morning, but the landmark number comes at a great cost.

For starters, there’s the $978 million loss in Q4’s adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Across all of 2022, Peacock absorbed a $2.5 billion loss.

Yikes, right? You ain’t seen nothin’ yet. On Comcast’s post-earnings conference call, company president Michael Kavanaugh said he Peacock losses to “peak” in 2023 at $3 billion. From there they’ll “steadily improve,” he said, as the NBCUniversal streaming services continues to inch toward breakeven, and hopefully, a profit.

The media analysts at Moffett Nathanson aren’t totally sold. “Peacock’s losses remain enormous, and its path to profitability is just as hard to see as always,” they wrote in a note to investors, on Thursday, questioning whether Peacock can “ever achieve winning scale or attractive long-term margins.” (The emphasis is theirs.)

Major Comcast costs beyond Peacock were a major thorn this past quarter. The company recognized a $541 million increase in severance expenses from October to December 2022; Comcast offered a “voluntary retirement program” to qualified employees toward the end of the year.

It wasn’t all subtraction by subtraction. Peacock added 5 million subscribers in Q4 alone, its best single-quarter result since launch. Management credited the streaming-subscribers growth to Telemundo’s FIFA World Cup, NFL “Sunday Night Football,” and Premiere League soccer, as well as its original films and series like “Halloween Ends,” which went day-and-date in theaters and on Peacock.

Just ahead of the October-to-December quarter, NBC and NBCUniversal cable channel Bravo pulled their next-day episodes off Hulu in favor of Peacock, drawing cord-cutters and “Real Housewives” superfans. Comcast still owns one-third of Hulu, but it is expected to sell that to Disney at a hefty price within the next year. An alternative theory, one Comcast CEO Brian L. Roberts has been happy to float: What if Comcast buys out Disney’s share?

Hulu or no Hulu, Roberts is, well, peacocking about his streaming business today. “We could not be more positive about our trajectory so far,” he said on the fourth-quarter conference call. “We’re right where we expected to be as far as investment and we’re well-above where we expected to be as far as paid sub. We wouldn’t be making the investment if we didn’t see the investment in Peacock… delivering a return over time.”

LUSAIL CITY, QATAR - DECEMBER 18: Nahuel Molina of Argentina celebrates with teammates after 2nd goal is scored during the FIFA World Cup Qatar 2022 Final match between Argentina and France at Lusail Stadium on December 18, 2022 in Lusail City, Qatar. (Photo by Richard Sellers/Getty Images)

Nahuel Molina of Argentina celebrates during the FIFA World Cup Qatar 2022 Final match

Getty Images

Roberts’ company saw enough ROI from its businesses in Q4 to comfort investors Thursday. Wall Street estimated Comcast would post 77 cents in earnings per share on $30.31 billion in revenue. The NBCUniversal parent company reported $30.55 billion in revenue and an adjusted 82 cents of earnings per share, beating analyst estimates. Comcast posted a $3 billion Q4 profit, $3.5 billion with adjustments.

Comcast’s cable-providing arm is still by far its largest segment. All of its key performance metrics were “good enough,” Moffett Nathanson wrote.

Moffett called theme parks the “standout” of NBCUniversal. UK broadcaster Sky, a “problem,” stands out for all the wrong reasons, namely its cash-flow issues.

In its own quick-turnaround analysis, Wells Fargo said Comcast’s balance sheet “remains in solid shape.” NBCU’s ad revenue of $2.9 billion and distribution revenue of $2.6 billion were in line with the bank’s expectations; Peacock’s own revenue ($660 million) actually bested its guess by $81 million. The near-$1 billion quarterly loss was also foreseeable, which makes it at least a bit easier for savvy investors to swallow.

Wells Fargo’s target price for Comcast stock (CMCSA) remains at $38, a bit below the current market; Moffett Nathanson has a $46 target price.

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