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Wall Street and entertainment industry analysts have started sharing their reviews of a Comcast/NBCUniversal investor day at which top executives unveiled pricing, content and other details of its upcoming streaming service Peacock, and many were duly impressed.
Dan Ives of Wedbush Securities, for example, called Peacock’s intention to serve ads to those who pay less “a smart move” and a “key differentiator” that could spell trouble for Netflix and other competitors. “The NBCU unveiling of Peacock was an impressive event with stars like Seth Meyers, Lester Holt, Jimmy Fallon and Tina Fey,” said Ives. “It is poised to successfully jump right into the mix with Netflix, Apple and Disney.”
Ives said that those, along with HBO Max, “will clearly disrupt the leader, Netflix, and its subscriber trajectory in this streaming battle over the coming years.”
The meeting at the NBCU New York headquarters at 30 Rock included presentations and commentary from the likes of Steve Burke, who, after eight years running NBCUniversal as CEO, is preparing to step down when his contract expires at the end of August; his successor Jeff Shell; and Comcast chairman and CEO Brian Roberts.
Peacock, set to launch in April, is NBCU’s entry into the streaming wars with a different strategy from peers, including a big focus on an advertising video on demand (AVOD) model.
“Hybrid models incorporating a combination of SVOD and AVOD make perfect sense for studio groups with both content and broadcast network assets,” Guy Bisson, director at Ampere Analysis, told THR in a first reaction to the Peacock unveiling. “As the TV market makes a general transition to streaming, it’s a logical step to move beyond the SVOD-only agenda that has so far dominated, towards the incorporation of advertising models as part of the wider bundle and choice options.”
He said that NBCU CEO Steve Burke’s assertion that premium ad-supported streaming TV is the ‘white space’ in the industry “is true, at least for the U.S. market where broadcaster VOD is less developed than in Europe.”
Added Bisson: “At the same time, focusing on AVOD means [the company] doesn’t risk cannibalizing its sister assets Comcast and Sky, which remain heavily embedded in traditional pay TV. Through windowing its key content across pay TV and AVOD, it will be able to benefit from both models during what will be period of transition as the managed decline of linear broadcast and traditional pay TV continues.”
Discussing Peacock’s paid tier and how it differs from the likes of Disney+ and Hulu, Bisson highlighted “the channel’s strategy and the ambition to become a platform that embraces third-party content and channels.” Concluded the analyst: “In that respect Peacock’s strategy is like a pick and mix of the latest streaming strategies of Peacock’s peers … embracing hybrid, limited advertising and an Amazon/Apple-style ‘channels’ platform.”
Overall, Bisson’s takeaway from the event was that the service would be “an attempt to create a streaming model akin to a Sky- or Comcast-type business with with free-to-air at its core — very much back to the future strategically.”
Benchmark Co. analyst Matthew Harrigan in a first reaction said Thursday’s event fit in with NBCUniversal’s recently unveiled One Platform, which will enable the company to sell ad inventory across linear and digital services. “Everything on the sizzle reels seems to dovetail with the viable One Platform strategy approach,” he told THR.
He also argued that Peacock looks like it could be “really reinventing the ad-supported platform with [a] five-minutes-per-hour cap and frequency caps — getting away from brain-numbing insurance commercial forced reps.”
Cowen analyst Gregory Williams was less convinced. “NBCU is attacking the streaming wars from a different angle than most of their peers, where the headline product is ‘free’,” he wrote in a report.”Management expects revenue from Peacock to be largely advertising-supported; 2024 financials assume a $6-$7 per sub per month advertising advertising revenue per user. While this is less than the $10 per sub per month that management identified for Hulu, it’s worth nothing that Hulu runs about 10 minutes of ads per hour, whereas Peacock is touting just five minutes of ads per hour as a key part of their value proposition for consumers. This suggests management expects a 20 percent-40 percent cost per thousand premium versus what Hulu earns now.”
Concluded Williams: “We weren’t totally sold on the notion that Peacock is going to revolutionize the ad market — several competitors also have a ‘new new thing’ ad product (AMS/Vantage at ViacomCBS and Xandr at AT&T) and calling the 70-year-old TV ‘sponsored by’ model ‘solo advertising’ doesn’t make it a real innovation over past practice.”
While others emphasized the breadth of content featured at the Peacock event, the Cowen analyst felt less strong about it. “Overall, while we think NBCU has a good amount of quality content, the clip roll at the beginning of the presentation didn’t seem as compelling (to us, anyway) as what we saw from either Disney or Warner/HBO during their respective analyst presentations,” Williams wrote. “Management appears to see Peacock as a way to better monetize existing viewership on other platforms that isn’t being monetized well or at all; however, monetization of content through Peacock seems likely to be meaningfully lower on a per viewers basis than on linear television.”
Other analysts though, including Ives, argued that NBCU’s expectations of 30 million-35 million subscribers by 2024 are conservative, given content such as The Office, Law and Order, Saturday Night Live, Chicago: Fire and a host of new and exclusive shows, as well as the Tokyo 2020 Olympics.
Investors were at least mildly impressed, as shares of Comcast advanced 1.3 percent after its Peacock presentation in Thursday after-hours trading.
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