The company, led by CEO Steve Burke, posts a lower film profit, but lauds the success of ‘Secret Life of Pets,’ as parent Comcast adds 32,000 video subscribers for its best third quarter in a decade.
Cable giant Comcast on Wednesday reported its third-quarter financials, including profit figures for its entertainment arm NBCUniversal, whose results were driven by the Summer Olympics in Rio.
Kicking off earnings season for big Hollywood players, NBCUniversal posted operating cash flow, the profitability metric the company uses, of $2.15 billion, compared with $1.66 billion in the year-ago period. That was up 31.5 percent from the year-ago period, or up 19.2 percent when adjusted for the recently acquired 51 percent stake in Universal Studios Japan.
The Olympics helped boost broadcast and cable networks results in the latest quarter, while theme parks profitability also improved. The film unit, meanwhile, posted third-quarter operating cash flow that was down 6.1 percent from the year-ago period. The result came despite the theatrical hits Secret Life of Pets and Jason Bourne.
NBCUniversal made $250 million-plus on the Rio Summer Olympics despite lower ratings, CEO Steve Burke told a conference earlier this fall.
“Although the 2016 Olympic ratings were down 25 percent versus 2012 (adults 18-49, primetime), NBC still had over four times the number of viewers than the other three broadcast networks combined during the Olympic Games,” wrote Wells Fargo analyst Marci Ryvicker in her earnings preview report.
Comcast chairman and CEO Brian Roberts lauded the quarterly results. “The Rio Olympics were the most profitable and successful games in our history and demonstrated our ability to deliver an unparalleled entertainment experience through NBCUniversal together with Comcast Cable,” he said. “NBCUniversal reported operating cash flow growth of over 30 percent, benefiting from the Olympics, continued growth at our theme parks and the theatrical success of The Secret Life of Pets this quarter. I’m proud of our consistent execution and excited about the opportunities ahead for Comcast NBCUniversal.”
On the company’s earnings call, he lauded “terrific operational and financial results” and “broad-based strength.”
Comcast’s cable systems added 32,000 video subscribers on a net basis in the period, marking the company’s best result for a third quarter in 10 years. In the year-ago period, it had lost 48,000 subscribers.
Comcast’s overall financials slightly exceeded Wall Street estimates as earnings rose to $2.2 billion, or 92 cents per share, up from 80 cents in the year-ago period, and revenue hit $21.32 billion, up 14 percent, or 5.5 percent when excluding the Summer Olympics.
Cable networks unit revenue jumped 22.0 percent to $2.9 billion in the third quarter on higher distribution, advertising and content licensing and other revenue. Distribution revenue increased 27.3 percent driven by the Olympics and contractual rate increases, “partially offset by a decline in subscribers at our cable networks,” the company said. Cable advertising revenue climbed 15.9 percent due to the Olympics. Excluding $432 million of revenue generated by the Olympics, cable networks revenue increased 4.1 percent.
Operating cash flow at the unit rose 7.0 percent to $893 million as the higher revenue was partially offset by an increase in programming and production costs associated with the Olympics, as well as increases in sports programming rights costs.
MSNBC ratings were up 95 percent in the third quarter amid election coverage, Roberts said, also touting a deal by USA and Syfy for the Harry Potter films. “We are taking the right steps” and “remain on a trajectory to grow this business,” Roberts concluded.
Broadcast TV unit revenue jumped 56.6 percent to $3.1 billion, with ad revenue up 92.4 percent, primarily driven by the Olympics. Distribution and other revenue increased 77.5 percent, due to the Olympics, as well as higher retransmission consent fees. Excluding $1.2 billion of revenue associated with Rio, unit revenue decreased 3.6 percent. Operating cash flow rose $228 million to $378 million, “reflecting higher revenue, partially offset by increased programming and production costs associated with the broadcast of the 2016 Rio Olympics,” the company said.
Roberts on the call lauded NBC’s strong year and said the fall season was “off to a good start” with This Is Us among the new hit shows and Saturday Night Live having its most-watched season premiere in years. He also once again lauded the performance of Spanish-language media powerhouse Telemundo.
Roberts also lauded the Olympics as “the most valuable and most consumed property in media,” despite the lower overall ratings, and he said the NBC primetime ratings lead over competitors widened compared with prior Olympics.
“Rio was also very strong from a financial perspective, significantly exceeding our prior results, and we believe [the Games] will continue to be a big success going forward,” Roberts concluded.
Quarterly film revenue declined 7.9 percent to $1.8 billion when including revenue attributable to DreamWorks Animation from its acquisition date of Aug. 22. The drop reflected “lower theatrical and home entertainment revenue, partially offset by higher content licensing and other revenue.” Theatrical revenue declined 21.1 percent, primarily due to the strong performances of Jurassic World and Minions in last year’s third quarter, “partially offset by the strong performance of The Secret Life of Pets.
Film operating cash flow dropped 6.1 percent to $353 million on the lower revenue and severance costs of $50 million associated with the DreamWorks Animation acquisition, partially offset by lower programming and production and advertising, marketing and promotion costs. “The decrease in programming and production costs was primarily due to lower amortization of film production costs in the current year period due to our larger film slate in 2015,” the company said. Cash flow would have risen when excluding the $50 million in severance costs.
Roberts welcomed the DreamWorks Animation team to the company and lauded Pets as “another valuable franchise.” Looking ahead, he said the company was excited about the theatrical start of Sing in December, calling it one of the best Illumination films ever.
Theme parks revenue rose 60.6 percent to $1.4 billion, or 16.1 percent when adjusted for the recent Japan deal, reflecting higher attendance and higher per-capita spending, driven by the opening of Hollywood’s The Wizarding World of Harry Potter attraction, as well as the positive impact of a stronger Japanese yen. Operating cash flow increased 62.4 percent to $706 million, or 17.1 percent when adjusted for the acquisition, “reflecting higher revenue, partially offset by an increase in operating expenses, including costs to support new attractions.”
