With many anticipating a bull market, investors might be looking for sectors that could offer fresh growth. Streaming stocks thrived during the worst months of the pandemic, but many of these companies have since seen a dip in their valuations, partly because of high interest rates, a weakened advertising market, and a maturing industry.
Despite these challenges, Comcast (CMCSA 1.85%) is one entertainment company that might just have unlocked a unique area of growth. Let's delve into the details.
The free-Peacock purge
When Comcast launched its Peacock streaming platform in 2020, the company offered Peacock Premium free to its 32 million Xfinity Internet customers. It's unknown how many took it up on the offer, but they were getting something that non-Xfinity customers had to pay $4.99 a month for. Comcast has recently made changes to the offering, and it could lead many of those Xfinity users to start paying for Peacock content.
Under the new arrangement, existing Comcast Xfinity X1 and Flex customers who took advantage of free access to Peacock Premium must now pay for it. Those customers have been offered Peacock Premium at a discounted rate of $2.99 a month for 12 months; otherwise, they will be bumped down to the free Peacock tier. (Customers must have previously signed up to Peacock, as Comcast axed the free plan for new sign-ups earlier this year.) Customers on higher-cost Xfinity plans will continue to enjoy free access to Peacock Premium for the next two years.
For Comcast stakeholders, the move to end the free Peacock ride for Xfinity customers could also help ease the financial burden of the streaming unit: Comcast has previously said it expects Peacock to lose $3 billion in fiscal 2023.
Comcast converts free users to paid customers
Getting Xfinity customers to pay for Peacock Premium might not be straightforward; at $4.99 a month, the service is one of the cheapest streaming platforms around. Yet, at 22 million paying customers, Peacock is far behind Walt Disney's Disney+ and Netflix, which have roughly 158 million and 232 million subscribers, respectively, suggesting price is not the most significant barrier.
Nonetheless, Xfinity customers who have enjoyed free access to Peacock's full library of content could be in a unique position to become paid customers. After all, they are users who have already been exposed to Peacock's offerings.
And perhaps in a comforting sign for Comcast stakeholders, research firm Antenna estimates Netflix has added more than 200,000 new subscribers since cracking down on password-sharing in the U.S. last month.
Still, there simply is no free Netflix for people to migrate to, so it could be that free Peacock is enough for many. But even then, that service is not a panacea -- particularly since it lacks popular shows like Yellowstone and Poker Face, WWE programming, recent Universal Studios movies, and more.
Comcast's long game
Comcast does not break out numbers for non-paying Peacock users, but according to Statista data, there were approximately 28 million active Peacock accounts at the end of the first fiscal quarter of 2022, 13 million of which had stand-alone paid accounts.
A year later, Peacock had added 9 million paying viewers -- and that was before the change for Xfinity customers. So if Comcast can convert a significant number of former non-paying Peacock Premium users to paid subscribers, it will surely be a boon for investors.
For those paying attention to Comcast's stock, it will be worth watching the company's next few quarters to see if it shows a notable bump in Peacock numbers following the Xfinity change. If it does, then it will be a sign that Peacock viewers are prepared to pay for full access to its content.
