COVID-19 cord-cutting helps push Comcast profits down 4.4%, part of industry-wide trend

The coronavirus pandemic hammered Comcast during the second quarter this year, as theme parks closed, sports were postponed, and almost half a million customers cut the cord.

The Philadelphia media giant’s profits fell 4.4% to nearly $3 billion from April through June, the company reported Thursday. Comcast lost 477,000 cable TV customers, while NBCUniversal’s revenues dropped more than 25%. Though its broadband business continued to boom, the company saw revenue declines across almost all other segments.

Still, the company’s earnings beat Wall Street’s expectations, and Comcast is hardly alone in seeing its business harmed by the pandemic. Rival AT&T, for example, lost 886,000 premium TV subscribers during the quarter as its profits fell, too.

Consumers have been canceling pay-TV plans at record numbers this year, even though the coronavirus has kept them home and, presumably, in front of their TVs. The pandemic accelerated the cord-cutting trend by suspending live sports and putting households on tighter budgets, industry analysts said. The virus also paused production of new shows — so entertainment offerings became stale — and forced bars, hotels, and other businesses to cancel their TV plans, too.

“What you have is kind of almost this perfect storm with a lack of sports, you have an economic downturn, you have rising unemployment, and so people are kind of feeling the pinch,” Bloomberg analyst Geetha Ranganathan said earlier this week. “Plus, you have a variety of streaming options that are available for a much more economical price point.”

The 477,000 TV customers that Comcast lost during the three-month period is nearly two-thirds of what it lost in all of 2019, when it shed 733,000 video subscribers.

Cord cutting isn’t all bad news for Comcast. The company’s cable unit has pivoted to the more profitable broadband service, and in the second quarter gained 323,000 internet customers. Revenue from high-speed internet was up 7.2% to $5 billion. The company’s new NBCUniversal streaming service, called Peacock, has 10 million sign-ups.

“Our response to COVID-19 has been extraordinarily fast and effective, and our products and brands continue to resonate strongly with our customers across all segments and all geographies,” Comcast chairman and CEO Brian L. Roberts said in a statement. “The solid results that we delivered in the quarter highlight the resilience of our company.”

But NBCUniversal’s cable networks, such as Bravo and USA Network, are exposed to the cord-cutting woes and changing media landscape. Consumers are increasingly turning to Netflix, Hulu, and other streaming services for movies and shows.

Revenues at the company’s cable networks were down 14.7% to $2.5 billion during the second quarter. Advertising revenue for the networks fell 27% to $679 million, while ad revenue for broadcast networks NBC and Telemundo dropped 28% to $959 million.

“Unfortunately, Comcast sort of has one foot in the cable business that is doing very well, and one foot in the media business that isn’t,” Craig Moffett, of the New York research firm MoffettNathanson, said earlier this week. “The whole idea of cable networks is rapidly becoming obsolete. And so, networks like USA [Network] are anachronistic and will never come back.”

Consumers fleeing pay TV are flocking to on-demand streaming, rather than so-called skinny bundles that offer fewer live TV channels over the internet, Moffett said. In response, entertainment companies are increasingly moving their best shows to their own on-demand streaming platforms, he said, but that trend only impoverishes the legacy ecosystem even more.

“What you’re really seeing is a decoupling of the sports and the entertainment ecosystems,” he said. “What we’re eventually going to be left with, whether it’s by hook or by crook, is what amounts to a sports- and news-only on live TV where everything else is delivered on demand.”

Live sports is considered the glue that’s keeping traditional TV together. But the return of live games won’t reverse the cord-cutting trend, in part because cable companies such as Comcast have given up on chasing video customers, analysts said.

Some of the dire results reported Thursday are likely to be temporary, though still vulnerable to the pandemic waves. Revenues from theme parks plummeted 94.1% from nearly $1.5 billion to $87 million while they shut down to slow the spread of the virus. Parks have since reopened, including Universal Orlando, though Florida continues to set records for coronavirus infections. The film unit’s revenues dropped 18.1% as theaters closed, too.

Sky, the European pay TV company that Comcast bought in 2018, saw its revenues fall 15.9% to more than $4 billion.

There was one major change in viewing habits during the pandemic that worked in Comcast’s favor. With theaters closed, NBCUniversal made the kids’ movie Trolls World Tour available as a $20 online rental and reportedly made more than $100 million in rental fees. On Tuesday, Comcast’s Universal reached a deal with AMC that will allow movies to be played in theaters for a much shorter period before being available at home.

Company shares closed Thursday at $43.67, down 0.52% in Nasdaq trading.