Comcast Earnings Note Q3 2023: Hulu Deal Looms Large As Roberts Ponders Long Game

26 October, 2023

The biggest immediate question for Comcast’s NBCUniversal is just how much it can wring out of Disney for its 33% stake in Hulu?

With negotiations underway, Disney will try to stick to the $27.5B floor for Hulu, while Comcast will hope JPMorgan Chase and Morgan Stanley agree on a significantly higher valuation.

Regardless of the final details, Comcast is likely to receive at least $9B at just the right time, with Wall Street calling on legacy media companies to cut costs and increase free cash flow. 

Comcast CEO Brian Roberts recently said “our plan is to return (the Disney buyout) to shareholders.” But could it also help fund a bigger play for the man who has made previous attempts to acquire Disney and Fox?

Parrot Analytics audience demographic data suggests a theoretical combo of Peacock and Hulu would not create a true four quadrant service, as both appeal to a slightly older and more female audiences. However, a future potential combo of Peacock and Warner Bros. Discovery’s Max would create a robust general entertainment streamer (regulatory obstacles notwithstanding) as Netflix pads its lead over the field. 

Peacock continued its momentum in Q3 2023, with US demand share for streaming original series hitting a new high of 3.9%, led by the Anthony Mackie-fronted Twisted Metal. However, Peacock remains stuck in eighth place among the major US streamers, and its path to breaking out beyond that is unclear.

Peacock’s total on-platform demand share — accounting for all movies and TV series available on a platform regardless of exclusivity — grew in Q3 as well. This was largely on the back of a strong slate of Universal films from the first half of the year.

Peacock is growing its subscriber base and keeping fans engaged with access to top level live sports, including Sunday Night Football, Notre Dame games, the Premier League, WWE, PGA, NASCAR and more. In January 2024 the platform will host the first streaming exclusive NFL Playoff game, which is expected to smash audience records. 

When it comes to demand for scripted content, Peacock is more reliant on broadcast series — which are most impacted by the prolonged Hollywood strikes — than any of its competitors. Comcast will hope Peacock’s live sports rights and Bravo’s treasure trove of unscripted programming make up for the lack of fresh content on the service. 

With streaming losses expected to peak this year at $3B, it’s truly time for this Peacock to try and fly. (Queue The Other Guys quotes)

Catalog Demand Share by Original Release Type

  • Peacock relies heavily on next-day NBC broadcast content, which will be heavily impacted by the strikes. Peacock must successfully leverage its popular reality programming — largely from Bravo — and its status as the streaming home of Sunday Night Football — to make up for this potential loss of engagement to carry through the fall.
  • Hulu is the second most reliant on broadcast series, meaning a potential combination of those services (in the unlikely event that Comcast were to buy out Disney's majority stake) would face a huge short-term risk with the lack of new broadcast content.
  • Streaming original content only accounts for a fraction of the overall demand for most streamers, showing why many legacy companies are now re-opening up their libraries to licensing deals after trying to build up walled gardens earlier this decade.

Audience Demographics: Peacock and Hulu

  • There is a lot of overlap between the Hulu and Peacock audiences, which means there could be affinity between the respective libraries.
  • Both do well with the older female audience, but neither fills in the gap of young male audience. This means a combination would not accomplish the most important goal facing entertainment companies today: scale.
  • Peacock and Hulu would not create a true four quadrant service. Disney+ is a better match for Hulu with its slate of Marvel and Star Wars content.

Audience Demographics: Peacock and HBO/Max

  • Comparing Peacock with HBO and Max Originals paints a different picture. HBO’s historically male leaning audience would fill in the gap of Peacock’s audience and create a four quadrant service.
  • Regulatory issue notwithstanding, combining the TV assets of NBCUniversal and Warner Bros. Discovery in particular would account for over a quarter of all US TV demand — 26.8% corporate demand as of Q3 2023. 
  • This would launch the combined company well ahead of Disney (19.9%) as the biggest player in TV demand, and each company’s streamer would work well together to create a general entertainment competitor to Disney and Netflix.

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