It’s rare–though not as rare as it seems–for a company to compete not just for the top spot in my weekly judgement of the most important story in entertainment, but to have two different stories compete. HBO Max has actually done that a few times, and so has Netflix and Disney+. This week was Peacock’s turn to step into the spotlight and throw down not just one, but two big entertainment stories. Let’s combine them into…
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Most Important Story of the Week – Peacock Acquires WWE Network, While Shutting Down NBCSN
When I first read the Peacock-WWE headline, I assumed they had bought the rights to Raw, the Monday night telecast of the WWE. No, they went all in and bought the rights for five years to the WWE Network, WWE’s streaming platform that delivers their pay-per-view events for a monthly fee. (With tons of documentaries, some original reality shows and re-runs of Raw and Smackdown.) Wow! That’s even bigger than I expected. Toss in shutting down the first major sports channel by the end of the year, and Peacock is definitely making moves.
With these latest moves, Peacock is trying to “become the TV habit” for millions of Americans. Let’s explain that and then decide if this was good or bad.
Netflix’s Best Metric and “Breaking the TV Habit”
A metric I beg for fairly often on this website is “monthly active users”, the percentage of all paying subscribers who watch a streamer in a given month. But you know what would be even better? The metric of how many monthly users who were active for multiple months in a row. In other words, over a six month span, how many customers used a service in a given month. Call it “unique streaming months”.
Let’s not stop there. Even better would be to know how many folks watch a given streamer every week. And once we have this level of granularity, we could cut the data all sorts of ways. Who streamed the most consecutive weeks. Or rank folks by how many days they stream per month. Or per week. And on and on.
Focusing on “unique viewing days per month” in many ways is a better predictor of retention than total usage. Both numbers are useful, but if you gave me a choice, I’d opt for the former.
Why is this so predictive? Well, think of a customer’s TV habit. It’s the end of the day, and they sit on the couch. Then they turn on the TV. In my case–a non-cord cutter–it’s to switch to the DVR to see what is on. I only interrupt this habit for certain streaming shows–Disney+ usually–or sports (which is why I don’t cut the cord).
But I’m not egotistical enough to believe my TV habit is representative of America. (Though, ironically, my habit is actually still the average consumption in America. Remember, according to the best TV analysis, 76% of viewing is linear/cable/broadcast/satellite, and only 25% is streaming.) For many folks, the habit is to sit down, turn on a Roku (or similar device), then go to Netflix, and scroll endlessly. Or continue bingeing whatever bingeable show they watched the night prior.
And yes, Netflix is a deliberate choice. They’re the first in the streaming wars, because they’ve built that habit in a huge number of customers in America and around the globe. For the “Netflix is TV” crowd, Netflix replaces turning on the cable box as “TV”. Even though I can’t prove it, I know that Netflix leads in “distinct streaming days per month” among the streamers.
Yet Netflix has a weakness.
Netflix’s Content Gap
“TV” can mean a few different things. Some TV serves to entertain. This can be either fake (fiction, dramas or comedies) or real (reality and documentaries). But it can also be informative, like news or sports. Notably, these last two categories are unique because they are also better served live than “on-demand”.
Netflix is an “on-demand” platform. When a customer wants it, they can watch it. This was, to be clear, a huge value to consumers, since they no longer had to wait for content until it aired on TV. (In truth, the DVR added a lot of this value previously, but on-demand is up another notch entirely.)
But all on-demand has limitations in the same way that all linear had limitations. Frankly, sports and news don’t work on-demand. They have to be live. This is what is saving the linear bundle right now.
And those two big genres–news and sports–are notable weakpoints in Netflix’s content library. Netflix has tried to air shows that are close to “live”, like nightly talk shows, but even these have for the most part not worked on that platform. It also makes a lot of documentaries–like Vox’s Explained series–but even these lag real time news by weeks or longer.
That leaves an opening for some clever new entrants in the streaming wars.
A Differentiated Competitive Advantage for Peacock – Live, Live, Live
When Peacock first rolled out, I was fairly bullish on their plan because, unlike other new entrants, Peacock really did seem to have an idea for a product that was unique compared to the giant that was Netflix (and the other streamers). I called them the “broadcast streamer”. Consider the dimensions of “on-demand” versus what I’m calling “fake vs. real” for content. If we made this chart for all the streamers, you’d get this:
(This isn’t based on numbers, simply my gut. And yes, many streamers have cheap reality. This is best looked at what a company’s priorities/branding are.)
Let’s interpret this. Essentially, Peacock said, “We know there are some folks out there who watch MSNBC for news, Jimmy Fallon/Seth Myers for late night, and then watch some sports. Our offering should serve them.” Their offering entices folks in with that recurring, live content. Then, hopefully, their entertainment offering keeps them around.
Consider, on the other hand, HBO Max. The bet for HBO Max is basically, “Hey, we have lots of content too. Instead of using Netflix for your habit, use us.” Which may happen, but more likely, some folks will watch some HBO shows, but then go back to Netflix. Netflix is their habit. Indeed, Prime Video has been deploying this strategy for almost as long and with about the same results. Hulu too, and they have an even better offering, recent TV.
So who is really differentiated in the streaming wars? I’d say:
– Disney+: Kids programming. Indeed, the Nielsen top movies essentially show that, for most kids, Disney+ has become the “TV habit”, replacing Netflix in the United States. However, when it comes to the rest of TV, Disney+ will struggle to replace Netflix as the TV habit on their own.
– Peacock: Furthest along streamer in “live” TV programming, including news, sports and actual linear channels to encourage lean-back viewing.
– Discovery+: This differentiation grows even further if you focus on quality vs. quantity of content. Discovery+ saw Netflix, Prime Video, HBO and Disney shelling out the big bucks for splashy, buzzy shows. And it said, “Here’s more 90 Day Fiancé”.
Everyone else is mostly mimicking Netflix, like Prime Video, Paramount+, Showtime, AMC+ and HBO Max. For the most part–boiling down strategy to one or two sentences lacks nuance–these streamers are trying to beat Netflix at their own game. We’ll see if they can, but I prefer differentiated strategies. Moreover, in Peacock’s case, this strategy also takes advantage of their biggest strength compared to Netflix, their wide-ranging experience in live sports, news, and even broadcast television.
Which is where the NBCSN sports (hockey, Olympic sports, NASCAR, Premier League “soccer”, cycling and IndyCar) and the WWE come in.
How WWE and NBC Sports Can Reinforce the Peacock TV Habit
In general, then, the WWE acquisition and move of some sports to Peacock is a signal that Peacock is growing its content in the places where Netflix is weak: live events. Of course, no strategic move is perfect, nor without risk. And let’s explain both of these moves in that light.
The big benefit for having WWE Pay-Per-Views and the NBC sports on Peacock is that each can drive repeated unique streaming days per month. Under a Netflix content strategy, you have to hope you can out-develop Netflix for the next big show or film. That’s pretty unlikely with all the content being made.
Instead, Peacock is focusing on delivering a product with known fans. Who tune in on a weekly basis. Say there is a die-hard WWE fan. Now, if they want to watch WrestleMania or replays of Raw and Smackdown, they’ll have to go to Peacock. The dream is that once they’re done, they’ll check out The Office or Law & Order or Yellowstone or, who knows, The Real Housewives. Boom, a TV habit is born.
Knowing that the WWE had 1.6 million subscribers recently, that’s a lot of potential regular viewers. That’s a ton of upside. (If it can retain all those subscribers? $192 million per year at $10 per month.)
See, there is always a risk for any sport that the vast majority who watch when access is easy–the followers and casuals–just don’t when it goes behind a paywall. That’s the terror keeping the NFL/NBA/MLB from going digital only. For example, look at the Pac-12 Network when it left AT&T distributors. I was a huge follower of all things UCLA. But would I change my whole cable bundle for college baseball and gymnastics? Nope.
The upside for Peacock is that the WWE Network subscribers had already opted in to digital-only. So there isn’t that worry here. That’s good.
But let’s not pretend these two decisions win the streaming wars. One of the reasons the WWE and some NBC sports are fine to go streaming-only is because, well, they aren’t that big to begin with. WWE does have a loyal fan base, but it’s not like it’s huge. As I just said, only 1.6 million subs, or 0.48% of America.
The counter I expect is, “They may be small, but they’re dedicated!” I heard/hear this a lot from producers, creators, networks and development executives defending shows/films that not many folks watch. Say a show is buzzy–and usually beloved by critics–but no one is watching it. The defenders then say, “But those who do LOVE it!” They usually have no data to support this.
My counter is that most shows are more the same than different. Same for sports leagues. Let’s say a fan could fall into one of a few buckets: fanatic, diehard, follower, casual. Define those how you want, but you’d roughly get something like…
If we know that the most popular sports leagues/shows aren’t just a little more popular, but multiples more popular, than we find out that even having devoted fans isn’t enough. Say one show has 100K viewers per week and another has 1 million. Essentially, the bigger show has more fanatics and die-hards than the other show has total viewers. That’s just the math.
This applies to NBCSN’s sports in particular. As great as it will be to get all of the NHL’s diehard fans to follow hockey onto Peacock, that number just isn’t very big. The NFL can deliver multiples more die-hard fans than hockey, Olympic sports, soccer (football), racing and everything else on NBCSN…combined.
Which is probably why the NBCSN announcement hedged that NBCSN sports aren’t just headed to Peacock, but also to the USA Network, about as traditional of a cable net as you can get. As folks speculated, the USA Network will become NBCUniversal’s general interest cable net, much like the purpose TNT serves for AT&T. If this were a war, USA Network is one of NBCUniversal’s fallback positions as it retreats from traditional linear distribution.
Add it all up, and I like these moves. A lot. Bringing in new regular users who can get locked in to your core customer value proposition is just a win-win. NBCUniversal continues to execute an actual strategy, and that’s unique enough in the streaming wars to be worth praising.
Lastly, on the headline, my take is that a company can “win” the streaming wars simply by 1. Making money and 2. Having a seat at the streaming table in 5-10 years. With its current strategy, Peacock is clearly on that trendline and we’ll see if the numbers support that in the next couple of years. (Netflix and Disney+ are the two closest to winning right now.)
Bonus Quick Thoughts
– Is this a good move for the WWE? Probably. As I just said, the big worry for a sports league–let’s call the WWE that–is that folks don’t follow, and you use their “fan lifetime value”, a term I just made up. WWE has a bit less risk with that here, in that folks who don’t cut the cord can keep watching on Fox. Yet, WWE can still sell pay-per-views through traditional channels, so I don’t see much risk of less exposure.
– Is this a good move for the USA Network? I think so. This gives another option for live programming on a few more days per week, and maybe during the weekend. That live viewing can then drive to the scripted programming better. In short, it’s fine.
– Bundlers want to replace Netflix too. When I talk about the “TV Habit”, the Roku, Amazon, Apple and Google’s of the world want their devices to be that habit. Instead of going to a specific application, you’ll just browse on their device. So far, none have really succeeded. Mainly because the streamers hate this.
– Price. Variety says sources say about $1 billion for five years. Running the math, WWE makes about $192 million per year (1.6 million times $10 times 12 months), so this isn’t outrageous. Likely, Peacock is paying $10 per sub, but they’ll transition WWE folks to either the $5 ad-based tier or $10 ad-free tier. For WWE customers, this feels like an even bigger win.
– But note! It’s also only a 5 year deal. Hmmm. If it works, expect a big jump at the end.