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Comcast CFO Expects Continued Q2 Video Customer Losses

Coming off a quarter where video subscriber losses were nearly four times heavier than the year before due to the COVID-19 pandemic, Comcast chief financial officer Michael Cavanagh told an industry audience they should expect more of the same in Q2.

Comcast lost about 409,000 video subscribers in Q1, nearly four times the 121,000 customers it lost in the prior year, mainly due to the COVID-19 pandemic. With the second quarter the first where stay-at-home orders were in effect for the entire three-month period, losses are expected to be around the same.

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Pay TV companies shed about 1.8 million video customers in Q1, tied to the COVID-19 pandemic, price increases and a spike in job losses. It was the worst quarter ever for the sector -- the rate of decline nearly doubled to 7.6% from 4.7% in the prior year -- and most analysts have predicted that the falloff will continue to accelerate. 

At the Credit Suisse Virtual Communications Conference Tuesday, Cavanagh added that Comcast has no plans to subsidize the video business with its broadband service -- which has seen record gains over the past several quarters -- adding that the company sees the traditional video/broadband bundle transforming in the future.

“Our strategy in video is that video is important because video is a great use of high-speed data,” Cavanagh said at the virtual conference, adding that the focus is on connectivity. “...Today, we look at video as important because it's a customer need and because we're the broadband provider and because we have the legacy of investing in X1, maintaining a position of helping in an ever more streaming world, helping customers navigate the video that they choose to buy while offering a bundle that we continue to think for the right customers, is a great value. But we're not going to force it upon you if you don't choose to see it that way.”

Comcast CFO Mike Cavanagh (l), Credit Suisse media analyst Doug Mitchelson (r) 

Comcast CFO Mike Cavanagh (l), Credit Suisse media analyst Doug Mitchelson (r) 

He pointed to Comcast’s broadband-only service Flex, which offers connectivity to streaming services like Netflix, Hulu and Amazon Prime Video as well as some Comcast video products, as being a key component.

“We're not wedded to being necessarily the seller of a bundle to you in video, but we would very much, if you appreciate either one of our alternatives, a bundle with X1 or a platform approach for video navigation aggregation through Flex,” Cavanagh said. “But we're not going to subsidize -- we're not going to spend broadband profitability. The point is to add to the customer experience, help reduce churn overall on the broadband product, which is a great value, and basically cement a deeper relationship. ...I think part of the shift to connectivity had been to look to integrate Netflix and Hulu and Amazon Prime and others -- we're sort of open -- because that's the better customer experience. And we think we have the technology that allows for that to happen.”

Cavanagh added he was optimistic concerning the national launch of streaming service Peacock on July 15, adding that the April soft-launch of the product has exceeded expectations “a bit.”

Comcast expects the service to hit its stride later this year and next year, when popular programming like The Office, the Summer Olympics and the Super Bowl is available.

The ad-based service has a lighter ad load -- about 10 sponsors have signed on for the next 18 months -- which should help drive engagement and addressability. But he added it also will be a learning experience in the early going.

“We think that's the right setup to generate the type of creativity such that when we come out of that period of the early days, the first sort of phase of Peacock, we'll have all proven to ourselves and each other and to the market broadly what we think will be high -- very high CPM values of advertising on this particular AVOD service,” Cavanagh said. “I would look at the early phases with the kind of anchor partners as very much an R&D and innovation phase of advertising.”