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EDITED TRANSCRIPT

CMCSA.OQ - Comcast Corp at Credit Suisse Communications Conference (Virtual)

EVENT DATE/TIME: JUNE 14, 2022 / 4:00PM GMT

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JUNE 14, 2022 / 4:00PM, CMCSA.OQ - Comcast Corp at Credit Suisse Communications Conference (Virtual)

C O R P O R A T E P A R T I C I P A N T S

Jeffrey S. Shell Comcast Corporation - CEO of NBCUniversal

C O N F E R E N C E C A L L P A R T I C I P A N T S

Douglas David Mitchelson Crédit Suisse AG, Research Division - MD

P R E S E N T A T I O N

Douglas David Mitchelson - Crédit Suisse AG, Research Division - MD

So good morning. I'm Doug Mitchelson, Credit Suisse's media and cable satellite and wireless analyst. Pleased to have with us today Jeff Shell, NBCU Chairman and CEO for our lunch keynote presentation. So this will be a fireside chat format. My questions are likely to run the full time, but feel free to e-mail me questions if by chance we do have some remaining time.

So Jeff, thanks so much for coming today. And just about 1 year ago to the day, you talked with a lot of optimism about the future of NBC Universal at our last conference, certainly been an eventful year since. I just wanted to start with the state of the union. Would you walk us through any learnings from the past year and particularly anything that surprised you? And how NBCU's strategy and growth outlook has evolved?

Jeffrey S. Shell - Comcast Corporation - CEO of NBCUniversal

Sure. And thanks, Doug, for having me, and thanks, everybody, for being here. So I'll just go 30,000 feet on this, and then you can obviously, Doug, drill as I know you will into any specific area.

But just kind of talking about the company, the way I think about it and we think about it. So we really think about it in 3 broad buckets. The first one is theme parks. We don't usually start with that, but let me just start with that really quickly. Our theme park business during the pandemic, obviously, we shut completely down and then came back. We chose to keep investing during this whole process, both in new attractions and in a big new park in Orlando. And the business has come roaring back.

So starting with that business is kind of appropriate because it's virtually in all of our parks, we're above where we were in 2019 despite not a lot of international travelers still, we're historic bookings in Florida hotels and our theme park attendance. Japan is all the way back now after kind of a slow start to the year with COVID. Hollywood is more than all the way back.

So we're kind of sailing into the summer on the theme park business really, really strongly. And we're hoping to kind of reopen our Beijing park kind of momentarily once we get through all the testing and everything here in the next couple of weeks. So that business is cranking, and we can talk a little bit more about that if you want, going forward.

The second business is just broadly speaking, content creation, big broad category, but that business is also cranking. Our film business, I don't think our film company has ever been as strong as it's been right now. I started there, as you know, when I came back from London in 2013. I think creatively, we're as strong as we've ever been. We're the only studio, I believe, who's making more movies in this year than we were last year. Everybody else is making less.

I think the whole level of the industry has increased as far as profit potential with some of the streaming deals and the change in windows, which we can talk about. And I think our creative situation is sailing into that strength perfectly, and we kind of saw this, this past weekend with Jurassic World just opening up to dominate business across the world, including China, which in one weekend, we are now the top movie of the year in China after only 4 days of release. So hopefully, the China market is coming back.

But across the rest of our content business, TV, our model of not just having a platform that allows us to maximize the creative value of every show, putting it where we think it will be most successful, but also selling to third parties is really doing well. Our news division, we really have no

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JUNE 14, 2022 / 4:00PM, CMCSA.OQ - Comcast Corp at Credit Suisse Communications Conference (Virtual)

competitors, given what's happened in the industry right now with our three-pronged approach with MSNBC and CNBC and NBC News NOW, which is our AVOD business, that's doing great.

And our sports business in a world of kind of increasingly rising sports costs, most of our key sports properties are locked up long term. So looking

  • and then, of course, Telemundo, which is gaining ground and Univision, and we have the World Cup coming here in a couple of months. So if you look across all of our content businesses, I think that second business, I'm very excited about, too. I think we've made a lot of progress this year, and we can dive into that.

And then the third business, which gets probably most of the ink and most of the talk is really the video distribution business. And I think in that business, we've made a tremendous amount of progress, Doug, since last time we talked. NBC continues to be #1. We're #1 again this season. And even though everything is declining, NBC relatively strength improves we still kind of have the one-two punch of USA and Bravo, with now sports on USA, which has bolstered that. So kind of our linear businesses are strong but declining like everybody else as people switch to streaming.

And with Peacock, which I'm sure we'll spend a lot of time in the next few minutes talking about, but it's gone from an idea to an execution. We clearly picked the right business model for Peacock, the ad-supported model, which I think we took a lot of heat on when we chose it, but now everybody is kind of diving into the pool with us. And we are very excited by our progress. 2 years, we've basically caught up to Paramount who's been at it for 7 or 8 years, and we're 1/3 to half the way as where Hulu is, and I'm very excited about the business model. And then we're doing all that with really most of our programming strength still to come that we can talk about. So very excited with the prospect of getting Peacock up to scale.

So that's kind of a tour of the business. I know not a lot of negatives there, but I'm really excited by where we stand creatively and competitively and I think we've made a ton of progress, and we can kind of dive in any area you want.

Q U E S T I O N S A N D A N S W E R S

Douglas David Mitchelson - Crédit Suisse AG, Research Division - MD

Well before we dive into those, why don't we -- we're about halfway through 2022. So I'm just curious, the execution priorities for the second half and into 2023, what are the important milestones you're focused on?

Jeffrey S. Shell - Comcast Corporation - CEO of NBCUniversal

Well, if you kind of go back to the beginning of the year, I was doing this last night actually for something else. And I was worried about if you kind of look at the year, so starting in January, I was really, across the company, I was worried about 5 things, there were kind of 5 things on my mind.

And one of them was getting our theme parks back up to cruising altitude, that's kind of happened already. Other than Beijing, where we're a little bit behind on that. But everywhere else, we're above where we were in '19 and feeling really good about that business.

I was worried about the China Olympics. I was worried about the Beijing Olympics. I was worried that we wouldn't be able to pull that off. It was a very tough operational Olympics and also an advertising environment. And that we pulled off, both from a kind of a broadcasting perspective and a revenue perspective. So that's behind us. So no longer worried about that and very excited about Paris in a couple of years.

I was worried about the movie business because we have a lot of big tentpole movies, and we bet on that business, and we have a lot to come. I was worried about that until Top Gun hit the theaters and then now really not worried about it after the performance of Jurassic and we have Minions coming and Nope coming and a really great - The Black Phone, which you probably haven't heard of, which is a great horror movie. So I'm very excited about that business.

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JUNE 14, 2022 / 4:00PM, CMCSA.OQ - Comcast Corp at Credit Suisse Communications Conference (Virtual)

So 3 of the 5 things I was worried about in January are kind of in the rear view mirror a little bit. They are not keeping me up at night anymore. I think the 2 things remaining we kind of talked about, getting Peacock to scale is critical for our company, having a scale streaming portion of our business to go along with our linear business is core to our model and even though we're doing well and we're right on track, we're spending a lot of time on it, and I'm thinking about that a lot.

And then, of course, the macro environment. We're not seeing any impact of the macro environment on our business yet, but how can you not be worried on the macro environment with inflation and everything else. We're keeping a close eye on that. Even as I said, we're not really seeing signs of it in our business yet. So that's kind of how the state of the union here. But having 3 of the 5 things I was worried about kind of in the rear view mirror is a nice place to be in June.

Douglas David Mitchelson - Crédit Suisse AG, Research Division - MD

Great. Well, let's go to #4 that we're still working on, Peacock, right? So when people would call up on Comcast, it's right up there and among the top questions. And so certainly an important topic. And you're making a major investment, right, $2.5 billion, I think is the guidance for losses this year you've outlined, taking this year's $3 billion of programming investment to $5 billion in the next few years. So investment is going to increase from here on the cost side. So can you walk us through the path to profitability for the service?

Jeffrey S. Shell - Comcast Corporation - CEO of NBCUniversal

Yes. So there's really kind of -- what I would say -- let me divide it. I do things in threes, and this is another example of that. So when we kind of divide it in 3 buckets.

So first bucket, of course, is distribution, how many people are watching? How many people are paying for it? We -- the big investment that we're making was a conscious decision. We had started with a more limited AVOD strategy, where we found that more people were much more subscribing and choosing to watch the premium service, so we chose to invest more money to go after more of the premium AVOD experience, $4.99 with advertising, and that's what's driving the increased investment. Very pleased with that.

I think as we noted in our earnings for the first quarter, we added 4 million-plus subscribers paying us in the first quarter, which took our subscribers to over 13 million paying subscribers. That means that we added, by the way, 1/3 of our paying subscribers in one quarter. And obviously, that was driven by the Olympics and Super Bowl, and I'll get to the programming investment in a second.

So if you look at that, the second quarter, we're obviously going to get to our programming strategy in a second, but we're going to ebb and flow each quarter depending on our programming and when we have things coming in at what time. The second quarter, we have none of our sports, and we don't yet have our movies and originals coming.

So what I've been pleased with in the second quarter is that we've been able to retain virtually all of the subs we added in the first quarter. So people came for the Super Bowl, had stuck around and kept paying us to watch things like Dick Wolf dramas and The Office and news. And even though we're probably not going to add a lot of subscribers in the first quarter, we didn't expect to, but we've retained the ones that we added in the first quarter.

And so as we move to the back half of the year, when all of our programming strength is coming, I think we're pretty optimistic that we're going to continue to grow paying subs. By the way, it's also important to remember that 13 million paying subs comes from only a portion of the country because in Comcast territory, Comcast homes who get Xfinity, get Peacock Premium for free. At some point, we'll roll that to pay. But right now, it's a benefit to our Comcast ecosystem. And so the 13 million doesn't represent a fair kind of representation when we have millions of people in Comcast homes getting it for free using the content, which we like, by the way.

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JUNE 14, 2022 / 4:00PM, CMCSA.OQ - Comcast Corp at Credit Suisse Communications Conference (Virtual)

So thrilled with our trajectory on paid, but obviously, a long way to go, right? Second category is advertising, which we actually make more per sub on our base advertising, our base subs than we do in subscription fees. Very pleased with that. Couldn't be more pleased with that. As I said, in 2 short years, we've ramped that up to a level that next to Hulu is probably second to anybody in the industry.

We are getting CPMs at the broadcast level, which we -- I don't think expected to. We had hoped to do that, and we are getting CPMs at that premium level which is great. So it validates kind of this business model we chose, a dual revenue stream to match kind of the core business, which was our thing. And then obviously, everybody else is who we were chasing before is now jumping into the pool behind us saying, "Oh, yes, we like this model, too." So it's great and it feels good to be where we are.

And then the core thing that's driving the investment is generally programming costs. So Doug, when you talk about losses, losses are driven by what you said, which is that we said $3 billion in programming costs this year going to $5 billion over the next few years. Most of that is our - on programming and most of the programming is our own program, our own content that we're buying.

So we basically have 4 main pillars of programming that we're spending money on. One is sports, that's driven us so far, where every sports deal we do, we don't do if it doesn't have a digital component. So if you kind of look at the 4 main ones we have, we have NFL, where not only do we have simulcast on Sunday Night Football which is the top rated show on TV, but we have an exclusive game coming up this year on Peacock.

We have the Olympics, which we have all rights. And I think once we were kind of able to redo all our distribution deals, you saw in Beijing, what we can do, where Peacock really was a nice clean way to watch the Olympics live. Any time you wanted to see an event, that was where you went. So we're thrilled with that.

English Premier League, which we renewed, which we have a lot of exclusive games on Peacock and of course, golf, which we have our PGA deal. So sports is really the driver right now. I'm very excited about the movie part of Peacock. We bought our own first window of movies. That kicked in this year. So as you know, it takes a little while because the movies that were in 2021 are still on HBO.

So now we have a couple of movies on Peacock as we go out throughout the year, you're going to see Jurassic go on Peacock and Minions go on Peacock and Nope go on Peacock. And I think in the next 3, 4, 5 quarters, you're going to see a real impact on films going in their first window on Peacock along with some selected kind of originals. So film is a key part of the strategy. And I think we're in the second inning on film really from Peacock perspective.

Third major pillar is using our linear strength, either day and date or next day, broadcast. We moved all the Bravo stuff next day exclusively on to Peacock a couple of weeks ago. But most of the content we get when it comes up, Hulu, as you know, we terminated our Hulu programming deal. We get all that back starting Labor Day, September 1. So that's going to be a real driver in the back half of the year.

And then finally, originals, where you can't be a successful streaming service unless you have original hits. The pandemic slowed us down a little bit on that, like it slowed everybody down, just producing things, but we're starting to see some of them hit the platform. And there's a couple that shows that I'm pretty excited about coming on Peacock back half of the year and early next year.

So the nice thing about it is we're buying -- the spend is for buying content and the content is deployable lots of different places. And we think this is the highest value creation possibility for this type of content. And so I'm -- I mean, I can talk about this for hours, as you can tell, but I'm pretty pumped up with how we're doing on Peacock.

Douglas David Mitchelson - Crédit Suisse AG, Research Division - MD

So quick clarification, I think the listeners understood what you were saying, but I think you sort of reviewed 1Q when you were talking about not going to add a lot of subs. I think you said in 1Q, I think you meant 2Q, right?

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Comcast Corporation published this content on 15 June 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 June 2022 13:52:04 UTC.