Comcast Corp. confirmed following the release of its second quarter earnings that it will be providing rebates to its American cable subscribers due to the lack of live action on regional sports networks this spring amid the Covid-19 pandemic.
In a move in development since before Comcast’s last quarterly earnings report, company senior vice president and chief financial officer Mike Cavanagh said funds are coming to Comcast that will be rebated to consumers.
“We expect that we’ll be getting some monies back from the some of the sports leagues based on games played or not played in the US,” Cavanagh said in a quarterly earnings call with analysts. “And when that does happen we, as we’ve said, will pass that back along to customers.”
Cavanagh did not detail the amount of expected incoming funds or timing for the rebates, though they are likely to come in the form of bill credits. A subsequent tweet from Comcast’s customer service account said, “Due to the hiatus in sports broadcasting, Xfinity expects to receive refunds from some regional sports networks. We intend to offer 100 percent of what we receive to our customers as a courtesy adjustment. Details are forthcoming.”
The individual amounts are also likely to vary by market and the number of RSNs in each subscriber’s plan.
For Comcast, however, the situation will be complex from an accounting and earnings perspective, as it owns seven NBC Sports-branded RSNS, and has a minority interest in the New York Mets’ SNY. As a result, it is both the leading regional sports programmer and top cable distributor in several markets, and will be moving money within the company as rights fees adjustments are made with sports teams and leagues for this year.
“We continue to experience a shifting of sporting events that it’s likely to create near-term volatility in our quarterly results particularly on the cost side,” Cavanagh said. “While we expect revenue declines to moderate as we move through the year, sports rights amortization will be highest in quarters that air the most events.”
Comcast’s new Peacock over-the-top network, meanwhile, has generated 10m streaming customer sign-ups since the service’s debut earlier this month. Company officials said the Peacock consumption has surpassed internal projections thus far as sports has been and will continue to be an important ingredient in its programming mix, unlike other rival entertainment-focused OTT services.
“Not only are more people signing up than we projected, but they are watching more frequently and engaging much longer than we projected,” said Jeff Shell, NBCUniversal chief executive.
Disney+, by comparison, exploded to more than 50m subscribers in just five months, buttressed in part by a popular bundle that combines that service with ESPN+ and Hulu.
Overall, Comcast revenue fell 12 per cent during the quarter to $23.7bn, as retreats in theme parks, its movie studio, and TV networks business more than offset gains in broadband subscriber growth.
In particular, Sky revenue fell 16 per cent in the quarter to about $4.1bn, and its advertising revenue decreased 43 per cent.
“Covid-19 has certainly posed near-term challenges to our business with the delay of sports, pressure on [direct-to-consumer] sales and a tough macro environment for advertising,” said Jeremy Darroch, Sky group chief executive. “But the strategies we’ve implemented to manage through the crisis have proved incredibly successful. We worked with our customers, pausing subscribers where it made the most sense, especially for those on sports products that tend to be sold separately. And this resulted in retention of 99 per cent of our total customers and over 95 per cent of our sports space.”
But Comcast continues to look ahead to the rescheduled Tokyo Olympics next year. Prior to the arrival of the pandemic, the company’s NBC Sports had booked a record amount of Olympic ad sales.
“It’s a total bummer for our company that we don’t have the Olympics right now. But for Peacock, it’s a bit of a silver lining for next year,” Shell said. “You have to remember, not only will have the Olympics in the summer of 2021 in Tokyo, but then we’ll have the Winter Olympics seven months later in Beijing. So we have two Olympics.
“And [NBC Universal Television and Streaming chairman] Mark Lazarus and the people back in their team are currently working on lots of different things that we can do to innovate on those Olympics and use the Peacock product, which by then will be even more distributed, to do some really innovative and cool things on the Olympics in addition to promoting it, obviously,” Shell said.