Will NBCUniversal’s AVoD gamble pay off?

Of all major new streaming services, Peacock represents the biggest unknown.

That’s not just because its hybrid business model is very different to existing SVoD players like Netflix and Disney+, offering a subscription as well as a free, ad funded service.

But it’s also because there are still some question marks about the nature of the service from Comcast-owned NBCUniversal, which launches in April 2020 in the US market.

Peacock’s run up to launch has also been marred by high profile executive changes, suggesting that NBCUniversal is still working out the exact business model and consumer offer for the service. Peacock was led by veteran TV exec Bonnie Hammer until October when she was replaced by long-time Comcast exec Matt Strauss.

However, Comcast and NBCUniversal are promising more details about Peacock at an investor meeting next week, on January 16th, where it will discuss its overarching strategy for the platform.

A marketing campaign for the service also kicked off in the US on Sunday night with NBC running a promo teasing that Peacock is hatching soon during an NFL play-off game, and during coverage of the Golden Globes.

So far, what’s known is that NBCUniversal is considering making an ad-supported version of Peacock free for everyone, according to a report by CNBC (which is owned by NBCUniversal), bucking the trend of charging for streaming products. The free version is likely to have a limited amount of content.

Previously, Comcast had planned on making Peacock free only to cable subscribers and Comcast broadband customers.

The move, which is likely to be clarified at next week’s investor meeting, comes as competitive streaming products have struck deals that make them available for no extra charge. Disney+, for example, is free for a year for Verizon wireless subscribers. Apple’s TV+ is free for a year with the purchase of a new device. HBO Max will also be free for AT&T premium wireless subscribers and top-tier broadband customers.

• Read more: HBO Max: Too late to the streaming party?

NBCUniversal is also considering charging around $10 a month for an advertising-free version of Peacock, according to The Information. That would put Peacock between WarnerMedia’s HBO Max ($15 a month) and Disney+ ($6.99 a month). NBCUniversal is reportedly discussing charging $4.99 a month for a version with limited ads.

Comcast plans to spend $2bn on the service in its first two years and aims for it break even by year five.

Peacock, whose name is a nod to NBC’s iconic logo, will roll out with over 15,000 hours of content.

• Read more: Disney bets big on the streaming market

Raiding the vaults
Much of Peacock’s content will come from the vaults of NBC itself, including The Office (from 2021, following a $500m deal last year) and Parks and Recreation, two of the most watched series on streaming services. Also available will be classic titles such as Brooklyn Nine-Nine, Cheers, Downton Abbey, Frasier and Saturday Night Live. Peacock will also carry films from NBCUniversal-owned Universal Pictures, Focus Features, DreamWorks Animation and Illumination, as well as acquisitions from other studios.

It’s also offering a slate of original dramas, including an adaptation of true-crime podcast Dr. Death, a reboot of Battlestar Gallactica, and an adaptation of Aldous Huxley’s dystopian novel Brave New World. New original comedies include Rutherford Falls and Straight Talk, and reboots of Saved by the Bell.

Peacock will also target the US Hispanic market, featuring more than 3,000 hours of Telemundo’s content, including an original dramedy Armas de Mujer, and popular library titles 100 Dias Para Volver, Betty in NY, El Barón and Preso No. 1.

“Peacock should be understood as the vehicle for NBC’s digital transition rather than as a fully-fledged competitor to Netflix and others.” Tom Harrington, Enders Analysis

It will debut in the US in April, and is set to be the focus of a massive marketing push during the summer’s Olympic Games, which air on NBC. Many of its originals will launch after the Games.

Comcast plans to roll the service out globally, “but that’s down the road a bit,” said Hammer shortly before she left the service.

She also stressed that Peacock would target a “very, very broad” audience. “We believe we’ll have something for everyone.”

Different versions of Peacock are still being beta-tested, according to CNBC, which says NBC Universal is trying to position it as a valuable streaming service while not cannibalising its traditional pay-TV business. NBCUniversal owns a number of cable TV stations, including CNBC, MSNBC, Bravo, USA, E!, Golf Channel and others.

The jury remains very much out on whether Peacock can make a success of its business. Tom Harrington, senior analysts at Enders Analysis, points to its lower market positioning than Disney+, HBO Max or Amazon Prime, and notes that it will offer less original content. “Crucially, like HBO Max, Peacock follows a model that looks predominantly wholesale.”

• Read more: Apple bites into the streaming market 

The new service, Harrington explains, will essentially be an upgrade of the NBC network, conceived to be distributed by other cable and satellite providers in their basic packages – with consumers perceiving it to be a ‘free’ upgrade.

“Direct retail to consumers, for which no price has been announced, is set to be a side business and likely very small. In this scenario, Peacock should be understood as the vehicle for NBC’s digital transition rather than as a fully-fledged competitor to Netflix and others,” says Harrington.

“The whole premise of SVoD has been that you pay a reasonable amount of money on a monthly basis for an ad free experience. And Peacock will be flipping that on its head.” Tim Mulligan, MIDiA Research

Untested waters
Meanwhile, Tim Mulligan, EVP and research director of MIDiA Research, says Peacock’s AVoD model “puts it in untested water because no one outside of YouTube has really made ad-supported video work.”

“It’s debatable whether there’s any more demand for AVoD because we’ve had 12 years now of subscription video on demand as the key driver of streaming engagement. The whole premise of SVoD has been that you pay a reasonable amount of money on a monthly basis for an ad-free experience. And Peacock will be flipping that on its head. Are people going to tolerate ad intrusions when they only have to pay the price of a couple of cups of coffee a month to be able to afford an SVoD.”

On the plus side, he notes that NBCUniversal has a competitive advantage in being able to leverage the distribution network effects of Comcast’s Cable Communications division, and NBC’s national and regional networks as well as its various pay-TV networks including CNBC, the Golf channel and the Olympic channel.

Add to this the production heft of Universal Studios, and its well-stocked library of feature films and prime-time TV, and Peacock needs to be taken seriously by other D2C competitors, says Mulligan.

The potential Achilles heel in the NBCU direct to consumer strategy is its concern over cannibalising existing lucrative streams, he adds, and a lack of clarity on the strategic importance of Peacock.

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This, he explains, is manifested in its two-pronged go-to-market strategy – it will be available as a TVE (TV Everywhere) app for existing Comcast subscribers, and as a standalone paid subscription AVOD service for other consumers. “While Hulu has demonstrated that there is consumer appetite for paid AVOD services via its basic ad-supported subscription tier, bringing a new one to market in the wake of the ad-free Disney+ and Apple TV+ is a bold move,” says Mulligan.

The full picture is likely to become much clearer after next week’s investor presentation. Then opinions will start to harden about whether Peacock can fly or not.