Most Important Story of the Week – 17 January 20: The Optimistic and Pessimistic Strategy Cases for Peacock

With that, the final major entrant of the streaming wars has called their shot. (Besides SuperCBS. Is holding on to CBS All-Access and Showtime really their entire plan?) So we didn’t have to go very far to find our…

Most Important Story of the Week – Peacock Announces Their Plan

Investor day presentations are the ultimate in needing to see through the flash for the substance. In data, it’s all about “signal versus noise”. In presentations, the noise is deliberate. It’s designed to confuse, overwhelm and mislead to get you to invest, support or buy. (Which is why I think most biz presentations internally should be in black and white. Let ideas stand on their own merits, not the quality of powerpointing.)

From that angle, I’d put Comcast-NBC-Universal’s Peacock debut above HBO Max and Apple TV+, but still lagging Disney+ (who knocked everyone’s socks off). They leaned into the “30 Rock” angle, which is smart branding. This is all the more reason we need to wear our skeptical glasses to look for what NBC-Universal didn’t tell us, or what Comcast overhyped.

Overall, my gut take is more bullish than when I first heard of “Peacock”, with some huge lingering caveats. Reading my draft today, I found the positives more compelling than negatives, which surprised me. I’ll dive into this area in three parts: The upside case, the downside case, and implications for (selected) competitors.

The Upside/Bull/Optimistic Case for Peacock

Strategy: Zigging while others zag means becoming the “broadcast streamer”

By the time Peacock is fully launched–while April is the target date, it won’t go national until July–it will be the last streaming platform to the party. NBC’s logic seems to be, if you’re late to the party, be free. 

Not a bad plan!

Then that way all the already spent wallets still have room. Since broadcast has always been “free”, you just pay with your time, there is some justification in saying, “We’re the broadcast platform of streaming.” I’ve always felt that NBC-Universal had the most broadly appealing cable channel offering. They have sports, news, dramas, comedies, and reality. Now it’s all coming to one platform.

Really, the way to look at this isn’t that Peacock is a slow follow of Netflix, but a fast follow of Pluto/Tumi/Xumo. Since I think those companies really do fill a customer need, I like the idea. Moreover, they have a differentiator, as they themselves pointed out, Peacock is essentially the premium FAST

Screen Shot 2020-01-17 at 1.18.25 PMWhile I respect the “zig while others zag” approach to business, it doesn’t work if you don’t have a strategy. My initial take is Comcast has a strategy here.

Customer Targeting: Latinx viewers

A natural part of business analysis is to assume everyone is like you. Avoid this temptation. In entertainment, this means I, for example, have huge blind spots in international viewership. This even applies to the US, where I lag in coverage on Spanish language programming. Comcast has owned Telemundo for a bit now, so they don’t have this blindspot:

Screen Shot 2020-01-17 at 11.42.07 AMCredit to Peacock for seeing this customer need and serving this demographic. (Netflix does serve this too, and entered Latin America very early on.) The “Spanish Language Streaming Wars” are probably worth a deep dive article.

Company: A surprising willingness to be innovative.

Consider this an extension of the “zigging while others zag”, but I had a genuine worry that Peacock would end up as another clone of Disney+, Netflix, Prime Video and HBO Max. (Mostly the same product and similar content profiles.) 

Except Peacock is definitely trying out a few new things, which shows a commitment to change we don’t usually see. Specifically, the “live channels” approach, which only furthers the “fast follow of PlutoTV” thesis. If you know what you want to watch, the UX will have on-demand video. But for everyone else–or the folks who just want something on in the background–Peacock will have live/streaming channels. Will this work? Maybe, maybe not, but at least it shows some innovation. (For example, nothing in the Disney+ launch was innovative to that platform, just more streamlined than Netflix.)

Content: Pretty darn strong, especially in TV.

Peacock helpfully provided a list of the shows they plan to air. (Probably not an exhaustive list.) And it’s pretty strong. I’m as impressed as I was during the HBO Max roll out. (Also credit to NBC PR for making the document available and hence easy on journalists to absorb.) Here are some specific content pieces I think will be strengths:

The USA Network Shows: This is the bread and butter that built Bonnie Hammer’s career–former head of NBC Universal Cable Productions, she now runs content for all NBC Universal–so naturally a lot of these shows will be on Peacock including Suits, Covert Affairs, Monk and Psych. It remains to be seen if they are “exclusive” digitally, but still a good slate. USA Network is historically underrated because it’s popular in middle America, not one the coasts.

The big broadcast shows: Everyone knows about The Office, but everything from Cheers to Brooklyn 99 to Frasier to Everybody Loves Raymond to Two and a Half Men will be on Peacock. That’s a hefty dose of rewatchable series. And lots of rewatchable procedurals in Law & Order and Chicago series.

Bravo/E! tentpoles: One of the strengths of NBC-Universal, I’ve always felt, is that they have a broad reach of channels to draw content from, for example, the unscripted reality space. At first, I didn’t see these shows on the list, but a lot of them will be on Peacock. While most reality doesn’t fare well in bingeing long term, some does.

Late Night: Premiering their two Late Night shows in the primetime window is a great change for customers, such as myself who usually watch tape delayed. This feels smart to me, as more and more content gets time shifted.

Content: New categories to one streaming platform: sports and news.

HBO Max won’t have sports; Disney is pushing all sports to ESPN+, and Netflix refuses to even consider it. Thus, NBC steps into the breach and says their streaming platform will have sports in the same interface. (Amazon, of course, has toyed with sports for a while and offers a few sports channels as add-ons, plus one NFL game in America.) Thus, ignoring the type of content, NBC may have an advantage here. ESPN+ and DAZN remain separate apps which could decrease engagement, except for hardcore sports fans.

But we can’t ignore content forever. The question is whether English soccer, NHL and two weeks of Olympics every two years is enough to sustain sports. I don’t think so, which is why I think Comcast could be a buyer for additional sports rights, be it more NFL, NBA, MLB or college rights. (The great pitch too is that this is both digital and physical, keeping both windows. I think professional leagues are rightfully scared of a “digital only” approach that risks losing viewership/fan engagement overall.)

As for news, the best thing about news is it’s much cheaper than sports to get into. Plus, NBC has a fairly strong brand, if titled toward one side of the political aisle on cable.

The Downside/Bear/Pessimistic Case for Peacock

That’s a lot of positivity for this launch. Which surprises me. I was really skeptical a few months ago. Any giant new business venture has potential pitfalls to hurdle, but Peacock may have more than others. And almost for every pro above I have a con below. So let’s get negative.

Strategy: The delicate balance of pleasing multiple masters.

My initial gut on NBCU’s streaming plans, going back to last January, was that Comcast looked at the lessons of TV Everywhere and decided…”Let’s do that again.” I don’t mean this as a compliment. TV Everywhere was always a confusing mishmash of differing apps and interfaces, which meant customers didn’t know what to do. 

The reasoning was that Comcast wasn’t just serving customers, but also trying to please cable providers. A lot of this plan seems to be trying to do as well. Disney+ and HBO Max are streaming services that seem to know the cable bundle will unravel at some point. Peacock wants to have its cable bundle and streaming service too. Keeping B2B customers happy at the same time as you keep customers happy is a tricky feat to pull off.

Meanwhile, there is the risk, for Peacock, is that the quad chart doesn’t actually work. They may be in the upper right quadrant by themselves because they’re making “lukewarm tea”. Folks want ice tea; they want hot tea, no one wants lukewarm tea. Folks may want premium subscription TV; they may want cheap ad-supported TV, they don’t want premium ad-supported TV.

Screen Shot 2020-01-17 at 1.18.25 PM

Further, being all things to all people runs the risk that you’re nothing to everyone. Let’s take one group and explore that…

Customer Targeting: Kids

Back before Netflix, of the five major kids channels (Disney Channel, PBS, Nickelodeon and Cartoon Network), Sprout was last place. Now, in the age of Netflix and Youtube, Universal Kids is probably seventh or eighth. I didn’t see enough in this presentation to think that just adding the Universal brand will right this ship. It gives them a shot (especially if someday they get Dreamworks Animated originals back from Netflix), but doesn’t clinch things. 

My worry for brands like Apple TV+, HBO Max and now Peacock is one of volume. Even kids content is a “hits driven business” which means you need a few shows to get the one hit that drives consumption. Disney is the best at this (leveraging Mickey Mouse, but also Doc McStuffins, Jake and the Neverland Pirates or TOTs) and Nickelodeon was built on Spongebob Squarepants. I don’t think Sesame Street, Curious George or Sesame workshop shows are enough to keep kids around.

Company: Still so many internal owners.

Echoing myself, if Comcast is trying to please a lot of external owners, it’s also trying to please a lot of internal stakeholders. And because of the decades of accretion through M&A, Comcast-NBC-Universal has some of the most complicated org charts in the business. Which is partly why the Peacock final plan has something for everyone and every business unit, from the ad-sales folks at every team to the development execs at every channel. In other words, the source of strength can also be a source of weakness, depending on the leadership’s ability to get everyone following the same beat. Iger did that with Disney, and we’ll see if Roberts can do that here.

Content: Universal lagging on “universe/franchises”.

 

Not lagging behind Netflix or Amazon–until Lord of the Rings actually debuts, Amazon doesn’t have a viable universe, plus they don’t own the rights–but still behind Warner Bros and Disney. Each of those studios has a superhero universe, Warner Bros has two fantasy universes, and Disney has Star Wars. Plus Disney has all the princesses.

Universal doesn’t have anything in the same league. This shows up mostly with kids. Fast and the Furious skews adult, which limits the merchandise upside. (Though it just launched a Netflix show.) Jurassic Park really shouldn’t be a franchise; it’s one great film that consistently fails to launch future series a la Marvel.

Meanwhile, the best engine for franchise development in the Universal portfolio–Syfy–has been historically a weak performer. I say this as a huge science-fiction fan who just doesn’t tune in enough to that channel. (Right now I’m only watching The Magicians.) Yes, yes, they will have Battlestar Galactica, but that’s another fairly straightforward story that can support a TV show, but not really a franchise/universe. We’ll see. 

Content: The Original Content doesn’t wow me…or feel “broadcast”.

Instead, it feels like the original, edgy content made by every other streamer. In the age of peak prestige TV, most channels make the same type of prestige TV series. Why not load up on police procedurals, legal dramas and shows set in emergency rooms? And more broad comedies? It seems like NBC is joining everyone else is letting CBS corner the “broadly appealing” market.

(One other content concern? They’ve done so many deals over the years selling rights to shows like Mr Robot and The Good Place that a few key shows [like those two] won’t be on the streamer. Again, untangling some of these legacy deals will take years for non-content arms dealers.)

(One other, other concern? To get in the game, Peacock still licensed quite a bit of content, from Two and a Half Men from Warner Bros to Yellowstone from ViacomCBS. Long term, when those deals unravel, NBC could lose customers.)

Implications for Others

Netflix & Apple TV+: They still need libraries.

We start with Netflix, because that’s what everyone cares about mostly. If originals bring folks in, libraries keep them around. As laid out by Mike Raab in one of the most elegant lay-outs I’ve seen, Netlfix and Apple TV+ will really, really lag in the library department by the end of the summer. 

Both also have risk that customer time–which Reed Hasting has said is the main thing folks are fighting for–is at risk with more compelling options. Not every customer will binge House from the beginning, but some may. Same with Brooklyn 99. And The Office. Or Psych. And kids may want to watch Boss Baby. Add those up and that’s a lot of potential hours of viewing leaving Netflix. Which won’t kill Netflix, but could impact the rate of churn.

Disney+ & Hulu: Kids won’t matter, but Hulu is the closest competitor

For kids, I think splintering more valuable content from Netflix–the Illumination films from Universal–will further hurt Netflix with kids, which helps Disney. (Notably, this won’t kill Netflix, as they still have a lot of other kids content.) More competition for consumer time/wallets as both are growing will raise Disney+ marketing costs, especially if Disney+ is slow to launch new TV series.

Hulu, though, is another ball of wax. A lot of this value proposition is what Hulu is already offering. Even if Peacock doesn’t take day after air shows from Hulu–which is the current situation–Peacock offers a lot of the same value proposition, so it stands to suffer that much more if Peacock works. Further, Comcast has all the same data that Hulu has, but it won’t have to share Peacock data with Hulu. Hmmm.

SuperCBS (ViacomCBS)

The arms dealer of arms dealer keep selling their content to the highest bidder. If someday they launch their own Viacom streamer, that will be an issue. In the meantime, they take the paychecks.

The Battle Lines of the Streaming Wars

If nothing else, the launch of Peacock clarified a lot of the dimensions of the streaming wars.

Aping an idea I hope to explore more in my “IPB of the Streaming Wars” series, it seems like the battlelines of the streaming wars are being drawn. 

– There is endless scroll/overwhelming libraries on one hand (Netflix, Youtube and Amazon) versus curation/limited libraries (Peacock, HBO Max and Disney+) on the other.
– There is binge releases (Netflix) and weekly (Disney+).
– There are subscriptions (everyone) versus ads (Youtube, FASTs and AVODs).
– And finally, the overwhelming question, original content versus legacy libraries. Which truly matters more and how much?

Well, that’s a lot of content for one column. I’ve been chewing on some other ideas (TV network ratings in 2019, data of the week), but you’ll have to wait until next week’s column.

  1. […] NBC released their plans for Peacock, my initial reaction was Peacock wants to be the most broadcast network of the streamers. This review of Peacock on Bloomberg essentially describes that as the mission statement. And this […]

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