The Covid-19 pandemic, which evaporated first quarter TV ad revenue, continued to depress the bottom lines for broadcast media giants in the second quarter. For Comcast, that has translated to a Q2 loss of more than 25% of NBCUniversal’s broadcast and cable ad revenues.
In quarterly earnings released today, Comcast said NBCUniversal’s cable advertising revenues declined 27% and broadcast television advertising revenue dropped 27.9% year over year, due to the continued economic effects of the pandemic on advertiser spend and programming like live sports.
The company is bracing for Covid-19’s impact to be felt for many more quarters, and Comcast CEO Brian Roberts told investors the company would treat the pandemic as the new business normal in the near-term. Amid the challenges, new changes to the company are coming: Jeff Shell, NBCUniversal’s CEO, told investors that a new structure under newly minted chairman of NBCUniversal television and streaming Mark Lazarus would soon be announced, with the aim of unifying the segment’s linear and nonlinear businesses. That move will be driven by the pandemic’s other effects—namely, consumer behavior.
“It is said that crises often accelerate and exacerbate trends that are already happening, and that is certainly true in the television business, where viewership is rapidly shifting from linear to nonlinear,” Shell said.
The immediate effects of the pandemic can be seen on the broadcast and cable side, where live sports’ disappearance resulted in considerable declines in revenue. Due primarily to the continued evaporation of ad revenue, NBCUniversal’s cable networks revenue was down 15% in the quarter; broadcast revenue declined 1.6%, as an injection of revenue from content licensing, which includes some transactions with new streamer Peacock, helped offset the substantial advertising revenue losses. UK broadcaster Sky saw a 41.2% decline in advertising revenues, and sports’ pause also translated in a loss of about 214,000 subscribers.
There were also considerable losses for Comcast’s theme parks business, which saw a whopping 94.1% decline in revenue in the quarter due to temporary parks closures. Total revenues for NBCUniversal in the second quarter declined 25.4% to $6.1 billion.
Comcast’s cable communications business remained relatively flat, as growth to its wireless and high-speed internet businesses helped offset a nearly 30% decline in advertising revenue in the cable segment and declines in its video business.
On the ad sales side, company executives are optimistic about the second half of the year. Shell said the company anticipates TV ad sales to pick up again going into the fall, especially as more programming, like live sporting events and some scripted programming, comes back.
“While the advertising market was hit hard, it is coming back more rapidly than we anticipated, and the upfront is now in full swing,” Shell said, nodding to NBCUniversal’s news group as a particular bright spot for programming. “We believe we can get our scripted production going again later this summer, and when combined with sports that are returning, we will have a schedule full of fresh and compelling programming on our various platforms in the fall.”
That optimism does come with a hitch. Linda Yaccarino, chairman of NBCU advertising and partnerships, told Adweek at its NexTech conference that the company was seeing a “protraction in conversations” with advertisers due to the ongoing uncertainty around the Covid-19 pandemic. Usually, NBCUniversal has wrapped its upfront negotiations by now, and announces the highlights of its upfront haul during the Q2 earnings call.
Peacock’s promising start
There’s another point of optimism for NBCUniversal: Peacock, which debuted nationally on July 15 following a three-month beta with Comcast Xfinity customers. The streamer has 10 million sign-ups to date, the company reported today, which includes both the beta and the two-week national availability.
The company didn’t break down how many of those sign-ups came through the beta (which made Peacock Premium, which costs $5 per month, available for free to Comcast’s nearly 19.5 million residential video customers) or from the national debut two weeks ago. It also declined to share information about monthly active users and hours watched, which Peacock chairman Matt Strauss said would be important metrics for a largely ad-supported service, but sign-ups are a helpful yardstick, and Shell said the company is “extremely pleased” with early results.
“Across the board, we’re better than expectations,” Shell said. “We didn’t expect this many sign-ups, we didn’t expect people to come back as frequently as they’re coming back, and we didn’t expect people to watch as long as they’re watching once they’re coming back. It’s very early days, but we’re very encouraged as we look forward.”
The promise of video-on-demand for NBCUniversal can also be reflected in a landmark deal struck with AMC Theaters earlier this week. The deal condenses the exclusivity window for theatrical releases to as little as 17 days, at which point films will be available for rental on premium transactional video-on-demand services.
The hope, Shell said, is that premium TVOD can help offset the dramatic revenue declines from continued theater closures: The segment’s filmed entertainment business saw an 18.1% decline in revenue overall (and a dramatic 96.8% decline in theatrical revenue, as most theater chains remain closed) in the quarter, and Shell said the film business was affected by a “chicken-and-egg” dynamic, where film studios were wary to release films when so few theaters are open, and theaters are wary of reopening with so few new movies to promote.
“We’ve always believed that TVOD can be a complement rather than a replacement for a robust theatrical release,” Shell said.