Oh, COVID. You giveth and taketh away, which was made even more apparent during Comcast’s third quarter.
The media giant handily beat consensus expectations on both the top and bottom lines and even boasted free cash flow that jumped more than 10% year-over-year to $2.3 billion.
Comcast’s legacy business is thriving, but its media businesses, NBCUniversal and Sky, are still feeling the wrath of the global pandemic.
It was a blowout third quarter for Comcast’s cable segment, its biggest business. The company announced that it added a record 633,000 high-speed internet customers, and on top of that, it reported cable margins increased to 42.7% during the quarter.
While cord-cutting remains an issue, the losses weren’t as bad as Q2 or what its rivals reported. Comcast lost 253,000 cable subscribers during Q3, which was fewer than the 427,000 losses in the previous quarter.
And that’s where the great news ends. Within the company’s NBCUniversal segment, theme parks revenue plunged an eye–popping 81%, to just $311 million from $1.63 billion last year. The filmed-entertainment segment saw revenue drop 25% year-over-year.
Now it’s no surprise that both businesses took a hit, but what is surprising is how upbeat and optimistic Comcast is when it comes to the theme–park recovery. NBCUniversal CEO Jeff Shell noted on the earnings call that theme parks were the single biggest drag during the quarter. Nevertheless, he added, “While it will take some time for parks to return to record levels, we remain very bullish on the parks long term.”
Specifically, NBCUniversal predicts the theme parks business will hit break-even, if not more, sometime in 2021. Shell mentioned that while no one can tell the pace of recovery given the uncertainty, theme parks are rebounding nicely in Florida and Japan, where parks are open. But that’s if they stay open.
Shell’s comments came exactly around the time Disney announced it was reclosing its Paris theme park, as France officially entered its second nationwide lockdown. Some are betting on a pretty swift COVID recovery next year, but if Disney’s latest move is any indication, we could still be a long way away from even a moderate recovery.
Perhaps the lone bright spot in NBCUniversal’s business was its recently launched streaming service Peacock. Comcast announced that as of Thursday, Peacock had 22 million sign-ups, up from 10 million in July. It’s important to note that sign-ups do not mean subscribers or active accounts.
When asked by an analyst for clarity on how many of the 22 million were subscribed to each of the three tiers, management just said the majority of revenue was from advertising.
For now, the growth story remains intact for Comcast, and the strong performance of its legacy business is keeping investors content for now. But can the cable business keep up this momentum, and if it can’t, will Peacock be able to save the day? That will be the main question going forward.