Summary
- Comcast is heavily exposed to the theme parks business and the multiplex model (through NBCUniversal).
- It has done the smart thing by not delaying its DreamWorks Animation project and instead releasing it through premium video-on-demand.
- The company also has its Peacock subscription service to help it through the tough times.
- The stock likely will see lower prices, but it remains a long-term buy.
Comcast (NASDAQ:CMCSA), like other media companies (and like just about all companies right now), is hurting from the CoV-2 crisis. Similar to Disney (NYSE:DIS), the cable giant has significant exposure to theme park and theatrical business lines. Both industries are at a standstill.
However, also similar to Disney (which I recently wrote about in terms of how it could better navigate the drastic downturn in economic activity), Comcast has levers it can pull. And indeed, it has pulled two of them recently.
The company decided to place its latest Universal/DreamWorks Animation cartoon, Trolls World Tour, on premium video-on-demand. In addition, it is leveraging its Peacock subscription service to cater to the quarantine generation (I will briefly touch upon this topic). In this article, I will share my thoughts on how management is dealing with the disruption.
Comcast is a long-term buy with a lot of short-term pain ahead of it. A lot, presumably. I say presumably because it just isn't possible for me to predict the price action to any large degree of accuracy, except to say I personally believe the market gets worse from here before it gets better. That presents an opportunity for cash-rich portfolios. We won't get out of the mess we're in until an effective vaccine is in the marketplace and has penetrated a significant amount of the population, so short-term could be anywhere from one to two years in duration. (The stock should begin to react ahead of the good news of a vaccine/treatment.)
"Trolls" And VOD
Every studio wants to release its major films in theaters whenever possible; it isn't possible now, so the next best thing is to place them on premium video-on-demand. I argued in my previous Disney article that, instead of delaying projects to other release dates, studios need to get them in distribution to bring in cash that is so highly coveted at the moment. Comcast got it right: consumers can rent, for a higher price than the normal pay-per-view window, the sequel to the DreamWorks Animation movie Trolls. Originally, before theater chains closed up shop, the plan was to day-and-date the title. Comcast decided to go ahead with the digital release and see how the film would be received.
Deadline reported the movie may have grossed well over $30 million in its initial weekend. An SA article by The Entertainment Oracle gathered reporting that says the figure may have maxed out closer to $40 million. Oracle also mentioned the more beneficial margin created by VOD - i.e., Comcast's studio asset would get a higher portion of the proceeds than what would be expected with the economics of the multiplex.
