Comcast committed to sports on Peacock but ESPN stake is “improbable”

  • Peacock added 2m subscribers in Q2, bringing total to 24m
  • Media giant has been heavily linked with move for NBA rights

Comcast says it will continue to invest in live sports rights as a means to drive subscribers to its Peacock streaming service, but has dismissed reports of it becoming a potential strategic partner for Disney’s ESPN.

The company’s chief executive Mike Cavanagh told investors that sport was a significant differentiator for Peacock, which serves up the National Football League (NFL), Major League Baseball (MLB), the Premier League and WWE, among other properties, to subscribers.

“One of the great drivers of Peacock subscriber growth has been sports,” Cavanagh said. “When I think about our own sports business, I think we’ve got one of the best portfolios in sports [including] Sunday Night Football, Big Ten, Premier League, Nascar WWE, the Olympics next year, and PGA [Tour golf].

“We’ve got a very acclaimed group of people in terms of producing excellent content around those sports … we are going to continue to be in sports and that’s the game.”

Peacock has doubled its user base to 24 million over the past 12 months – a rate partially driven by the closure of its free tier and the removal of the service as an added extra for its Xfinity broadband customers. However, it needs more subscribers to achieve scale and become more profitable.

Although Peacock’s revenues have increased by 85 per cent to US$820 million, it has, like other streamers, amassed significant losses as it invests in technology, marketing and programming.

That deficit in Q2 increased year-on-year from US$467 million to US$651 million. However, these losses were down quarter-on-quarter, reflecting Comcast’s previous prediction that streaming loses would peak in 2023.

Despite this push for profitability, Comcast has no intention of eschewing major rights deals, believing sport to be a powerful acquisition and retention tool.

That said, this won’t stop it expanding its sporting portfolio as an acquisition and retention tool. NBC has been heavily linked with a partnership with the National Basketball Association (NBA), which is seeking a significant uplift in revenue and greater reach in its next media rights cycle. The suggestion is that the NBA is preparing a streaming package that could be ideal for Peacock, while NBC could offer linear reach greater than the league’s existing partners ESPN and TNT.

“Obviously the NBA [rights are] coming up,” added Jason Armstrong, Comcast’s chief financial officer. “That’s a fantastic property. We don’t necessarily need it, given the portfolio we have, but given its strength and our historical involvement in the sport [it’s] something I would like to take a look at. But we will see where that goes.”

However, NBC’s enthusiasm for sport will not extend to a potential tie up with ESPN, Cavanagh suggested. Disney is looking for strategic partners as it transitions to a streaming future, with reports earlier this week suggesting that it had held discussions with the NFL, MLB and the National Hockey League (NHL).

Cavanagh said such an investment was unlikely: “I would just say that that’s very improbable. As you can imagine, there’s tremendous issues around tax, minority shareholders and structuring generally. So, I would put aside the idea that there’s anything inorganic that is likely to happen around ESPN in particular, which is what we’ve been asked about.”

SportsPro says…

Comcast has been the most obvious example of a major media firm using sport as an acquisition tool for its generalist streaming service. While ESPN has kept its flagship linear channel separate from its direct-to-consumer (DTC) service, Fox has ignored over-the-top (OTT) completely and Warner Bros Discovery (WBD) has no significant sports component to speak of in Max, Peacock has put sport front and centre of its proposition.

While some might question the wisdom of abandoning the cable bundle entirely when it shut down NBCSN, it makes sense for Comcast to double down on sport and drive that association in the minds of consumers. Indeed, its ability  to combine the reach of its linear network with streaming is hugely valuable to rights holders, as shown by the arrival of the Big Ten later this year and NBC’s reported interest in the NBA.

The ESPN chatter makes sense in that context, but any potential tie up would be hugely complex – especially as the network manages its own migration from linear to DTC. And, at some point, Comcast will be keen on stemming those losses.