Comcast Corp - Class A (CMCSA) — Q2 2024 Earnings Call Transcript

Thank you, operator, and welcome, everyone. Joining us on today's call are Brian Roberts, Mike Cavanagh, Jason Armstrong, and Dave Watson. I will now refer you to Slide 2 of the presentation accompanying this call, which can also be found on our Investor Relations website, which contains our safe harbor disclaimer. This conference call may include forward-looking statements subject to certain risks and uncertainties. In addition, during this call, we will refer to certain non-GAAP financial measures. Please see our 8-K and trending schedule issued earlier this morning for the reconciliations of these non-GAAP financial measures to GAAP. With that, I'll turn the call over to Mike.

Thank you, Marci, and good morning, everyone. Before I hand it over to Jason, I'd like to comment on three key elements from the quarter. One, broadband; two, parks; and three, the NBA. So, first is broadband, where the competitive intensity that we've seen for the past several quarters, particularly felt in the market for price-conscious consumers, remains essentially unchanged. Throughout this period, our broadband strategy has been consistent and we remain confident in our plan. We are focused on generating healthy broadband revenue growth by striking the right balance between rate and volume and relying heavily on market segmentation that I'll speak to in a minute. As a result, in the second quarter, ARPU grew 3.6%, which was within our historical range of 3% to 4%. Despite the competitiveness of the recent past, we've maintained a market-leading base of 32 million broadband customers by refining our go-to-market approach to create options that fit each of our customers' lifestyles and budgets. Providing the best products with flexibility and choice at different value points has served us extremely well for many years and remains the core of our playbook. Of particular note, this quarter, we launched our suite of NOW products, which are high-quality internet, mobile, and streaming TV offerings designed to be incredibly simple with attractive all-in pricing, with no contracts or credit checks. These are great options for the price-conscious segment, especially for those impacted by the end of the government's ACP program. While we are pleased with our enhancement to our offerings for the price-conscious segment, the reality is that the vast majority of our customer base subscribes to more premium products. We feel great about our market position relative to fiber, which is our true long-term competitor. We are investing in additional network capacity, multi-gig speeds, and in-home WiFi technology to capitalize on the Internet consumption trends we are seeing. One of the most important metrics we monitor is the magnitude of data traffic flowing across our network. Again, we saw double-digit year-over-year growth this quarter, with broadband-only households consuming over 700 gigabytes of data each month. Our customers continue to take faster speeds, with around 70% of our residential subscribers receiving speeds of 500 megabits per second or higher, and one-third getting a gigabit or more. These positive consumer trends play to our strengths and will only accelerate with the shift of live sports to streaming, which, together with entertainment on streaming, accounts for nearly 70% of our network traffic today. My final thought on broadband is the importance of bundling with mobile, with 90% of Xfinity Mobile smartphone traffic traveling over our WiFi network. These two products work seamlessly together to benefit our customers from both the products' experience and financial value standpoint. We are very pleased with the momentum we saw in wireless this quarter, where our line additions were again above 300,000 and nicely up year-over-year. Our new converged offers resulted in better overall yield and awareness as well as higher multi-line attach rates. We are excited for some of the new mobile offers tied to the Olympics, which will be introduced to the market in just a few days. Now, let's turn to parks, where our results were down in both revenue and EBITDA when compared to last year's record performance, with two-thirds of the decline driven by lower attendance at our domestic parks. We attribute this to several factors. First, is what now appears to be a COVID recovery pull-forward of a magnitude we hadn't previously appreciated. I think it's important to zoom out and look at how this business has trended over the past few years. Going back to 2022 and 2023, parks were clearly the early beneficiaries of substantial rebounds in tourism and travel after the pandemic, resulting in a surge in demand that contributed to us reaching record results for both of those years. More recently, other travel options, including cruises and international tourism, given the strength of the dollar, have experienced their own surge in demand, which caused visitation rates at our parks to normalize. The second factor affecting attendance at our domestic parks is the timing of our investments in new attractions, where we are light in Florida in advance of next year's opening of Epic and our lapping of Super Nintendo World in Hollywood is creating some headwinds for us as well. While the parks results are below our original expectations for the year, we still view parks as a terrific long-term growth business for us. We couldn't be more excited about the opening of Epic Universe in 2025, as we've been releasing new details about Epic's Five Immersive Worlds. The consumer reaction has been tremendous. Recently, we opened an Epic Universe Preview Center in Orlando, and the foot traffic and guest enthusiasm have been off the charts. We look forward to Epic Universe having a meaningful impact by driving incremental attendance, longer visits, and higher per-cap spending once the park opens in 2025. Finally, let me talk about the NBA. Our expectation is that soon an 11-year rights deal between ourselves and the NBA will be announced. We don't believe that the resolution of matching rights will affect the package that we expect to be awarded. This package, which begins with the 2025-2026 season, includes 100 NBA games each regular season across NBC and Peacock, which is more than any other media partner and more regular season games than each existing partner has under the current rights deal. For playoffs, we will have first and second round games each year, exclusively on our national platforms, and six NBA conference final series over the course of the term of the deal, which is more playoff games on average each year than any other media partner. Exclusively for Peacock will be approximately 50 national regular season and post-season games, including National Monday Night games and doubleheaders. Additional elements of the NBA package include the annual NBA All-Star Game and All-Star Saturday Night each season, the season opening NBA tip-off doubleheader each season, a special doubleheader on the MLK holiday, and select NBA games in every NBA All-Star game on Telemundo. Beyond the NBA itself, we're excited that our package includes the WNBA, where starting in the spring of 2026, we'll have more than 50 WNBA regular season and first round playoff games each season across Peacock, NBC, and USA. We'll also have games in seven WNBA Conference semifinals and three WNBA Final series. For USA Basketball, we'll have the rights to USA men's and women's games leading up to the Olympics and FIBA World Cup. Sky Sports will air all of NBCUniversal's NBA and WNBA games in its markets. Finally, Xfinity will be the NBA and WNBA's marketing partner in the video category. Now, I'd like to take a moment to explain why we're so excited to partner with the NBA. First, it brings in a broad, diverse, and youthful audience that is culturally relevant and further expands NBCUniversal's tremendous reach across broadcast and streaming. This new fan base will allow us to create new entertainment content that will work beyond the basketball season with exciting opportunities for companion programming and marketing collaborations that tap into the NBA's pop culture appeal. Second, the nine-month basketball season completes our year-round calendar for sports, which already includes the NFL, Olympics, Premier League, NASCAR, PGA Tour, Big Ten, and World Cup. Our NBA package will establish much-watched Sunday, Monday, and Tuesday night traditions on NBC and Peacock. Third, we are uniquely able to drive strong value with the NBA in multiple ways: first, by growing ad sales, by selling NBA ad inventory packaged with the rest of our marquee programming; second, by acquiring and monetizing subscribers both on Linear and Peacock; and third, by optimizing NBCUniversal programming investment across sports, entertainment, and news. The NBA's decision to partner with us is a testament to our breadth and reach, our operational excellence in sports and innovation, and our decades of experience delivering world-class content to consumers. Much like our long-standing relationships with the NFL and the Olympics, we look forward to putting the weight of our entire company behind our partnership with the NBA for decades to come. Before I hand it over to Jason, I want to share one final thought. In just a few short days, we have the honor of kicking off the 2024 Olympic Games in Paris. This will be NBCUniversal's 18th Olympic Games as a US broadcaster, dating back to 1936 when we first covered the historic event on NBC Radio. It is one of the great moments of pride for our company, and I want to thank the 3,000 people working to bring all of the action, excitement, and incredible stories to our viewers across the country.

Thanks, Mike, and good morning, everybody. I'll start with our consolidated results on Slide 3. Total revenue decreased 2.7% to $29.7 billion. Within these results, our six major growth drivers, including residential broadband, wireless, business services connectivity, theme parks, streaming, and premium content at our studios, generated over $16 billion in revenue, well over half of our total company revenue and grew at a mid-single-digit rate over the past 12 months. Keep in mind that in the second quarter of last year, we had one of our most successful quarterly theatrical results in our history, which included two of 2023's top-five grossing films at the worldwide box office, The Super Mario Bros. Movie and Fast X, and as such created a difficult comparison this quarter. If we exclude our studio results, total revenue would have been consistent with the prior year. Total EBITDA was consistent at $10.2 billion, and free cash flow was $1.3 billion. Free cash flow was impacted this quarter by higher-than-usual cash taxes, which were up $2 billion over last year's level and were impacted by a tax payment associated with our Hulu stake and other tax-related matters. As you'll recall, we received a minimum floor payment for Hulu at the end of last year. During the second quarter, we returned $3.4 billion of capital to shareholders, including $2.2 billion in share repurchases, and over the last 12 months, we have reduced our share count by over 6%, contributing to our adjusted EPS growth of 7%. Now, let's go through our business results, starting on Slide 4, with Connectivity & Platforms. As usual, I will refer to our year-over-year growth on a constant-currency basis. Revenue for total Connectivity & Platforms was consistent at $20.2 billion, as strong growth in our connectivity businesses was offset by declines in video and voice revenue. Residential connectivity revenue grew 6%, comprised of 3% growth in domestic broadband, 17% growth in domestic wireless, and 14% growth in international connectivity. Business services connectivity revenue also grew 6%. In domestic broadband, our revenue growth was again driven by strong ARPU growth, which increased 3.6% this quarter, well within our historical range as our team continues to effectively balance rate and volume through customer segmentation. The environment for broadband subscribers remains intensely competitive, which when combined with traditional negative seasonality in the second quarter led to 120,000 subscriber losses. Related to this, I would like to spend a minute on ACP. It has been well-documented that the government ended all funding for the ACP program in June. Consistent with our approach to normal promotional roll-offs, we were proactive and prepared for this action early in the quarter, communicating with our ACP customer base and migrating many of these customers to different products and price levels. While this had a bit of an impact on ARPU in the quarter, we still feel very comfortable that we will remain well within our historical 3% to 4% ARPU growth range for the remainder of the year. In terms of subscribers, we saw minimal impact from the end of ACP this quarter. Looking ahead, we expect the bulk of our ACP-related subscriber activity to happen in the third quarter, including losses associated with non-pay churn. While it's too early to assess the full impact, we are encouraged with the response we see from these customers to date. Outside of ACP, we are seeing the same level of competitive intensity and expect an offset from seasonal tailwinds as the third quarter is typically a seasonally stronger quarter compared to the second. Turning to domestic wireless, revenue growth was mainly driven by service revenue, with some modest growth in equipment revenue this quarter as well. Customer lines increased 20% year-over-year, reaching 7.2 million in total, including 322,000 line additions this quarter. The acceleration in line additions compared to the prior several quarters was driven by some early success with new pricing plans launched in April, targeted at multi-line customers, as well as continued traction with our Buy One, Get One line offer. You will see us continue to test new ways to capitalize on the significant opportunities we see ahead for us in wireless, in terms of both increasing the penetration of our domestic residential broadband customer base, which currently sits at 12%, as well as selling additional lines per account. Wireless continues to be a key growth area for us and one in which we are striking the right balance in delivering exceptional value to our customers, bundling to enhance our opportunities in broadband, and continuing to drive profitability higher. International connectivity revenue was mainly driven by broadband, which accounts for over two-thirds of our international revenue and grew at a mid-teens rate, reflecting strong ARPU growth. The remainder is wireless, which grew due to both additional lines and ARPU growth, but at a lower rate due to the variability in handset sales. Business services connectivity revenue growth of 6% reflects steady growth in small businesses with even faster growth in mid-market and enterprise. While the SMB market remains competitive, we are competing aggressively by delivering best-in-class products and services and growing revenue through ARPU growth, driven by higher adoption of additional products that expand our relationship with our SMB customers, like Mobile, Security Edge, Connection Pro, and WiFi Pro, as well as through targeted rate opportunities. At the mid-market and enterprise level, our revenue growth is primarily fueled by the increase in our customers, driven by the investments we have made in this space to build sales and fulfillment, as well as expanding our capabilities in managed services, wide area networking, and cybersecurity. Finally, video and other revenue declined in the quarter. The high single-digit decline in our video revenue is a function of continued customer losses, coupled with slower domestic ARPU growth versus last year, and the lower other revenue mainly reflects the continued customer losses in wireline voice. Connectivity & Platform's total EBITDA increased 1.6%, with margin up 90 basis points, reflecting a decline in overall expenses driven by the continued mix-shift to our higher-margin connectivity businesses, coupled with ongoing expense management. As I have previously mentioned in prior quarters and think is worth noting here, the only expense line item that had a meaningful increase over last year was direct product costs, which are success-based and tied to growth in our connectivity businesses. Breaking out our Connectivity & Platforms EBITDA results further, residential EBITDA increased 1.1%, with margins improving 100 basis points to 39.9%, and business services EBITDA growth rebounded nicely this quarter, returning to a mid-single-digit rate, while margin declined 70 basis points to 57%, reflecting the investments in sales and fulfillment we are making to scale in the mid-market and enterprise space. Now, let's turn to Content & Experiences on Slide 5. Revenue decreased 7.5% to $10.1 billion, and EBITDA decreased 11% to $1.9 billion. I'll detail these results further, starting with theme parks. Revenue decreased 11%, and EBITDA declined 24% in the quarter compared to last year's record level for a second quarter. As Mike highlighted, two-thirds of the decline was driven by our domestic parks due to lower attendance compared to last year, largely reflecting two factors; normalization in demand post-COVID, combined with the timing of our domestic attractions. This is the first full quarter comparison to the highly successful opening of Super Nintendo World in Hollywood early last year, which drove that park's record results in the second quarter of last year. We haven't launched a major new attraction in Orlando since VelociCoaster in 2021 in anticipation of Epic Universe, which we originally planned to open this year. On the international side, underlying growth at our park in Osaka continues, partially offset by foreign currency, as well as some softness at Universal Beijing due to the local macroeconomic environment. To reiterate, we couldn't be more bullish about the long-term trajectory of parks. In addition to Epic Universe, we have a fantastic slate of new attractions and experiences on the horizon, including Donkey Kong Country in Osaka and a Fast and Furious Roller Coaster in Hollywood, as well as the Universal Horror Unleashed in Las Vegas and our Universal Kids Resort coming to Texas. Now let's turn to media, where revenue increased 2% and EBITDA was up 9%, driven by Peacock. Peacock revenue grew 28%, with 9% growth in advertising and 61% growth in distribution, driven by the 38% year-over-year increase in our paid subscriber base to 33 million. On a sequential basis, we held subscribers fairly steady. As we noted during our last earnings call, our focus in the second quarter was on subscriber retention due to the lack of new tentpole content in the quarter. This timing and content also contributed to some relief in our expenses, which helped drive year-over-year Peacock EBITDA improvement of $300 million. We are pleased with the progress we are making, with media EBITDA for the first half of the year up nearly 3%, as the improvement at Peacock outweighed the pressure at our TV networks. As we look to the second half of the year, we expect continued modest growth in overall media EBITDA, but with some variation in the degree of year-over-year improvement between the quarters, driven by the timing of sports, entertainment launches, and marketing. Beginning in the third quarter, we are loaded with incremental content, including the Olympics, Sunday Night Football, which will have an additional game fall into the third quarter, as well as Peacock's exclusive NFL game from Brazil and the return of Big Ten. Given the timing of this content, EBITDA growth will be skewed to the fourth quarter. At studios, revenue decreased 27% and EBITDA decreased 51%, reflecting both the timing of our film slate and a tough comparison relative to last year's second quarter, which included the tremendously successful Super Mario Bros. movie, as well as Fast X. We have said our film slate is weighted to the back half of the year, which we believe will drive better year-over-year performance, and we're off to a strong start. Despicable Me 4 had a terrific opening weekend earlier this month, making the Despicable Me series of movies the first animated franchise in history to cross the $5 billion mark. Twisters is off to a strong start, landing at number one at the box office this past weekend. We're excited about our upcoming titles, including Wild Robot in September and Wicked in November. I'll wrap up with free cash flow and capital allocation on Slide 6. As I mentioned earlier, we generated $1.3 billion in free cash flow this quarter, which includes a $2 billion increase in cash taxes over last year's level. Total capital spending declined 10% compared to last year, with the $3.4 billion in spending reflecting the significant investments we continue to make to support our growth drivers, such as expanding our footprint and further strengthening our domestic broadband network, scaling our streaming business, and supporting the continued build of our Epic Universe Theme Park ahead of its opening in 2025. Turning to return of capital, for the quarter, we returned a total of $3.4 billion to shareholders. This includes share repurchases of $2.2 billion and dividend payments of $1.2 billion. Notably, since we restarted our buyback program just three years ago, we have reduced our share count by 16% and returned just under $50 billion to shareholders through a combination of buybacks and dividends, prudently balancing the investments we've made in the business around our six core growth drivers, protecting a strong balance sheet, and providing strong capital returns to shareholders. Now, let me turn it over to Brian for some closing remarks.

Thanks. To tie everything together, what Mike and Jason have just said and as our results continue to show, I believe we are dealing with the competitive landscape shifts exceptionally well. That's because we have a great team across the company that knows how to execute and innovate. We have the scale, balance sheet, and relevancy to compete with anyone. So, if you think about what we're doing to position ourselves for growth, we've expanded our broadband network by 1.2 million new homes passed in the last 12 months, the most in the company's history, and we put a plan to continue to do that. We're upbeat about the long-term in parks despite this quarter, and we are about to finish building the biggest, most technologically advanced theme park to hit the US market in decades with Epic Universe next year. As you've seen recently, instead of engaging in a process to buy content companies, we have focused primarily on organic opportunities, like the NBA, one of the most coveted sports franchises across the globe, which will help drive growth for us well into the future. With that, let's hand it over to Marci to take your questions.

Thanks, Brian. Operator, we are ready to open the line for questions, please.

Thank you. Good morning. And Mike, thanks for all the detail on the NBA contract. I appreciate that. I wanted to ask about parks and broadband. Maybe, Jason, on broadband, you made some comments about ACP and how Dave and the team are managing it. It seems like it's going well. It seems like you were implying third quarter losses might be down from Q2. I don't want to put words in your mouth, but you talked about an offset around seasonality; I was just wondering if maybe you could revisit that and a little bit about how you guys are managing it from a product and marketing point of view in the third quarter. And presumably, that's the end; we can move on beyond 3Q, and we can put ACP behind us, so I wanted to ask about that. And then, on parks, thank you for all the color. When you guys look at your pacing data, which I imagine you've got months ahead of you that you can see, do you see any churn, or should we be thinking about year-on-year pressure on this segment moving at least through the end of the year and into next year as we get ready for Epic? Any more color on sort of what the outlook looks like would be appreciated. Thanks so much.

Hey, Ben, this is Dave. I'm going to jump in a little bit on the ACP part first. I think it's important to just cover a little bit of context and then we'll get to the outlook in view of Q3. Most of the enrolled ACP customers, as we said before, have been with us on a postpaid basis, so I think that’s an important thing to remember. Our strategy has been consistent. We've been looking to help the ACP customers stay connected through a variety of options, starting with Internet Essentials. Since 2011, we've connected millions in the largest, most comprehensive private sector Internet adoption program in the country. The good news is that our ACP customers are eligible to switch to our Internet Essentials tiers that we have, and we have a couple. In addition, we have Xfinity Mobile, and we have good offers through this transition to help them save money on their monthly bills. The Internet Essentials customer, the plus tier, customers could take a free line of Xfinity Mobile for a year, and ACP customers who add Xfinity Mobile can get an additional free unlimited line for a year. We spent a lot of time thinking about this, preparing for this, and in many ways, it's similar to the promotional roll-off activity that we've managed for decades, so we're used to that. From a subscriber viewpoint, as Jason said, we saw a minimal impact in ACP in Q2. Looking forward, we expect the bulk of the ACP-related subscriber activity to happen in the third quarter, including losses associated with non-pay churn. Very focused on retention. It's early, but we're not seeing much voluntary churn in this group. Our goal, we'd like to get through the ACP impact as quickly as possible. Right now, we're planning to take a reserve on incremental non-pay activity in the third quarter, but again, it is too early to quantify, and we just won't know until we're further through the cycle. We have a normal disconnect process that we managed for a long period of time, and again, this is the post-pay universe that we have managed through.

Yeah. I think Dave said it perfectly. As you think about the third quarter, Ben, unpacking it and similar to what we saw in the second quarter, the competitive environment remains intense but is stable. It's sort of no worse, no better than we've seen over the past couple of quarters, I think that's the starting point. Second, as we pointed out, it's a quarter where we do get seasonal tailwinds; the same things that were headwinds in the second quarter largely become tailwinds in the third quarter. And then there's ACP that works against that where we will see an impact. As Dave said, the intention is to be largely through the impact by the end of the third quarter between actions we've seen and the reserve we will take. That’s the thing we have to make sure we execute very well against, but as Dave said, the early trends on that, whether it's voluntary churn or trends we've seen so far in non-pay and building non-pay reserves around that are encouraging.

Great.

And, Ben, it's Mike on parks. To hit on that, and I appreciate the question, I think we covered a lot in the earlier remarks, but I'll start where Brian last finished, which is we couldn't be more excited about and confident in the long-term trajectory of the parks business, particularly as we look ahead to next year with Epic Universe, which is truly looking unbelievable. Other attractions are coming; Hollywood is going to get a coaster and Donkey Kong Country into Osaka in the latter part of this year. Timing is still to be determined on both of those. But in the near term, I think the domestic attendance challenge that drove two-thirds of the poor comparison is due to the factors causing that, which is really the COVID pull-forward that we talked about and the timing of attractions, particularly in Hollywood lapping Super Nintendo. In Florida, the fact that we originally planned to have Epic opened this year but pushed it back due to COVID has created a lull in the action. We haven't started a new big attraction since VelociCoaster in 2021. As a result, the trends that we are experiencing likely continue until we get to the opening of Epic sometime next year.

Thank you, guys.

Thanks, Ben. Operator, next question, please.

Hi, thank you. Good morning. A little bit more on ACP, if I could. Mike, could you just give us any early insight you've got on the delinquency rate for people that are 30 days or 60 days past due, just so we can sort of get a sense of what non-pays may look like? And then, presumably, there was some impact, certainly, there was in the first quarter, of just lower gross adds in the category because new enrollments were shut off, and somebody moving across the street, for example, would lose it at their old address but not be able to get it at their new one. Do you have any estimate for how much ACP impact there might have been in the gross add category? And then, just two — one simple housekeeping question. You typically report cable margins on the conference call in the script. I didn't hear it; maybe I missed it, but I'm wondering if you could tell us what cable margins were in the quarter.

I'll let Dave handle the ACP question, Craig. It's Mike.

Hey, Craig. Dave. So, in terms of delinquency rates, we’re watching it closely. We have a normal process that we manage through based on due dates and voices, and it goes anywhere from two to three months. There's nothing to report at this time. Other than to go back to what I said earlier, we've been very proactive; I think we’re helped by experience and promotional roll-offs and the fact that we tried to put customers into packages that made sense for them proactively. So, there's a lot of work that went into that ahead of time, but nothing to report and we'll give more as we go. In terms of the question on lower gross adds impacts on connects, it was not material that we saw in Q2. Maybe just a little bit in terms of things that we said, but yeah, it wasn't a substantial impact in Q2. We think the bulk of what we're seeing is really going to be on the non-pay side, which will occur in Q3.

Hey, Craig, let me hit the margin question real quick. The way we're looking at the business is really across Connectivity & Platforms. So, looking at it that way and managing the business that way. But to unpack it, legacy cable margin, if you wanted to look at it that way, was up 110 basis points in the quarter to 48.4%.

Okay. Thanks. Could I ask one more question about your current thoughts on BEAD and whether we might anticipate additional capital investment in that area?

Yeah, this is Dave. We're looking at BEAD closely. It will be worked out on a state-by-state basis. We're optimistic in a lot of cases, but we'll have to look for the guidelines and the specifics tied to it. Nothing at this point would suggest we're going to be beyond the capital intensity that we've already given out. I think, with all — I mean, we're optimistic. One of the points that Brian mentioned, the 1.2 million that we've done in the last 12 months is astounding. The machine is really going. So, we're leaning in, going for it, but BEAD will be on a state-by-state basis.

Operator, we are now ready for the next question.

Thank you. I have an NBA question and also one on advertising. The benefits, as you outlined, are pretty obvious of getting the NBA, but it does come at a significant price. I was hoping you could walk us through how you expect to make a positive financial return and maybe elaborate a little more on what role Peacock will play since there's a clear benefit there. But how does it affect programming spend for other areas, including general entertainment? And then, as part of Peacock, maybe you could talk about the StreamSaver, the bundle with Netflix and Apple TV, and the response you've had? And then, on advertising, the upfront is now done. Maybe you can talk a little bit about the unique selling position you've had relative to others and what the volume is overall on pricing, etc., just what you're seeing in the overall market?

Sure. Hey, Jessica, it's Mike. I think I've essentially covered everything that I wanted to cover and can cover at this stage on NBA in the prepared remarks. Obviously, when the NBA makes its ultimate announcements, that will be another moment where we can go deeper. But just to the point generally is that we are looking at the NBA as we all said as some of the premier content that is culturally relevant, excellent audience, widens out the calendar year for us across Peacock and NBC. We can do a lot with the demographics that follow the NBA alongside other programming. So, think about the business case for it. When you look at the long-term and as we are managing the media business, broadcast and Peacock as one, the unique reach that we have and ability for a sport like the NBA to reach so far with our existing broadcast business and use, as I said earlier, plenty of exclusive games for Peacock to drive excellent acquisition in Peacock. We've talked about before; Sports has been a great source of acquisition for us in Peacock and a great source of value to the consumer. But what's very interesting to us is how significant the viewership is of sports viewers on Peacock, of things other than sports. When you take a zoom out and think about the total picture of what we're trying to do, which is to bring our excellent TV media assets into the future, we view the NBA as an excellent piece in that puzzle and it will allow us to rebalance programming from other areas. Obviously, we'll fill a few nights on NBC with this content versus other content, and we'll use this to do acquisition spend in Peacock and lighten up in some other places. The long-term goal for Peacock is to have a service that is a balance of sports, entertainment, and news. So our content teams are now very focused on that new audience and what we're going to do to drive entertainment content with the advantage of being linked closely to the NBA and to the audience that follows it. Then, on advertising, so second quarter, only a slight step down from the first quarter, but clearly we had a much heavier load of sports in the first quarter than the second quarter. Adjusting for that, I'd say again that the advertising market remains pretty stable, and we feel very well-positioned for the second half of the year with the Olympics coming up starting this Friday, elections, and a great slate of content coming to NBC and Peacock. In terms of the upfront, we're pleased with our results. Total volume for us is going to be basically in line with last year as is linear price. We got well over $1 billion in upfront volume for Peacock again, which is a nice growth over what we had last year. If you step back, we'd say the overall upfront market was pretty solid. We moved quickly, given the strength of our assets, to secure the volume that we got. We feel we were a success in this more challenging upfront given the arrival of so many of the new players, especially in the AVOD and SVOD space. That's the report on the upfronts, but we're moving forward and feel like the team did quite a good job.

Thanks, Jessica. Operator, next question, please.

Great. Thanks. Maybe on the cable side, a little bit better trends in both video and wireless. On the video side, what's driving the improvement there? Do you expect it to continue? And are you seeing any effects of the launch of the NOW brand? Then, in wireless, you guys talked about some new pricing and promotion, but do you think you're benefiting at all from some of the ACP losses on the prepaid side? I don't know if you guys saw yesterday, Verizon announced they turned off 400,000 subscribers. I think we'll see something similar with the rest of the wireless companies. But do you think this underlying growth is sustainable, or do you think that ACP is somehow boosting the growth at this point? Thanks.

Hey, John. Dave. In terms of video, as Jason said, our video losses are lower than last year. This is tied to a slightly less rate increase this year than last year. The key for us in video is just positioning video with broadband. Video does help in that regard. We've seen positive churn in terms of video and reimagining video around the NOW TV product and IP. It's still early, but it has been helpful. I think for the right segment, we offer a lot of value, and we continue to position it very well with broadband. It's still difficult, with some of the fees and things that we have, but I think it remains an important category for us. On wireless, NOW Mobile is not material at this point; it’s way too early. The acceleration in line adds over Q1 has driven early success of the new pricing plans, making us really competitive now in multi-line pricing. Launched in April, we targeted it for a while, and now it's scaling. It's really got traction, along with the Buy One, Get One line offer to our base. Wireless is such an important part of our overall strategy and key that it's 12% penetration, so we've got great runway ahead.

Thanks, John. Operator, we're ready for the next question.

Thanks, guys. I guess for Jason, two quick ones on content costs in the connectivity business. They came in quite a bit lower than we expected, and I'm wondering if you can give us a little bit more color on what's driving the trend there and how sustainable it is. Then, we're trending a bit lower than guidance on CapEx so far this year. I'm wondering if that's just timing-related or if it picks up in the back half of the year. And then, Mike, I'm not sure if you — I heard you loud and clear on having sort of said what you can on the NBA deal. I'm wondering if you can just give us a little bit of context around the timing of costs and revenues, though. When — I recognize it's forward-looking, but when should we expect to see the costs from the new contracts start to hit? Thank you.

Thanks, Jonathan. Why don't I start with CapEx? Dave will hit content costs, and then Mike will cover NBA. On CapEx, you're right; we've had some variability this year. I would say, relative to the initial guidance we gave on the Content & Experiences side, we talked about this being the final significant year of Epic spending, and then we get relief beyond this. On the Connectivity & Platform side, which I think is probably where more of your question was, we gave a capital intensity envelope as we entered the year. We also said we intend to do 1.1 million-plus in terms of homes passed. We're obviously trending a little bit above that at this point, but still feel comfortable with the capital intensity envelope we gave.

Just on the content cost side of things, that's also timing-related. Every contract with a programming partner is different, so I won't go into specifics. But it's key that we focus on, for us, flexibility increasing market choice. We segment the marketplace, both video and broadband, and together, that is important that we're competitive in every segment. At the end of the day, we're focusing on value.

On NBA, I wish it were sooner, but the contract doesn't start till the 2025-2026 season. Fall of 2025— that's when we would start to bear the expense of the right side of it. And obviously, that is also as we build into that when we would begin to see the benefits of subscriber acquisition.

This is Brian. Just want to close out perhaps Mike's opening comments on the NBA. Opportunities like this come along very rarely when there's long-term relationships up for grabs. When it gets announced, the detail that Mike described, we'll have probably more content than anybody, and it's all at a value that we'll be able to support and demonstrate. One of our real advantages here is the way we're running the media business, and Mike created one group with our existing assets like NBC and our growing asset like Peacock. Putting that together is very appealing for the reach, for consumer access, for the innovation that we'll have in the years ahead, and you'll see some of that innovation during the Olympics. There will be a lot of content on NBC, but way more content on Peacock, and it allows for the trends that we're seeing in viewing behavior. It's a very exciting moment, and I think we'll have more to say in the weeks ahead.

Thanks, Steven. This concludes our second quarter earnings call. Thanks for joining us.