How Bold Will NBCUniversal's "Low-Risk" Streaming Bet Actually Be?
The Comcast division’s OTT approach avoids cannibalizing its lucrative cable business and allows the conglomerate to sell ads on multiple platforms while delaying an all-out effort to challenge Netflix.
In three years' time, Steve Burke and his NBCUniversal will be forced to make a company-defining decision. Its licensing deal with Netflix for The Office comes to an end in 2021, and with it NBCU's top brass will need to determine whether they want to go all in on what, by then, will be a 1-year-old streaming service.
There are two paths that lie before Burke: Make a Disney-esque proclamation that he will pull NBCU programming from third-party streamers as he shores up decades of Saturday Night Live episodes and back-catalog shows like 30 Rock. Or test whether catalog fare like The Office, which Burke and his NBCU colleagues regularly tout as Netflix's most watched show in a given month, can fetch a Friends-style $100 million one-year licensing fee.
For now, Burke is signaling that his approach will hew more to the latter. "When the time comes, we'll look at our existing direct-to-consumer service and what kind of volume it has and how much we could expect to make if we moved it over," he told The Hollywood Reporter on Jan. 14, "and we'll have a discussion with Netflix and we'll decide what's right for the show."
At a moment when tech giants and entertainment conglomerates are throwing billions at the problem of how to capture audiences accustomed to viewing programming on-demand, NBCU is taking a more measured approach. In a move that one person who knows him calls "classic Steve Burke," NBCU has found a way to launch a streaming service that won't threaten subscribers from the cable companies but, in fact, use those pipes (including ones operated by owner Comcast and newly acquired portfolio company Sky) as distribution.
"This is a low-risk way of approaching SVOD," says BTIG analyst Rich Greenfield. "It doesn't disrupt their ad business because Linda Yaccarino will get to sell ads on it. It doesn't hurt their subscription business because you need to be a cable subscriber unless you want to pay."
A source familiar with NBCU's decision making says that the strategy Burke laid out Jan. 14 was one of several discussed internally as the company readied its streaming plan over the past year. One option, which the former NBCU exec describes as coming out of the entertainment group, was a CBS All Access-style service that could serve as an extension of the existing broadcast network.
Others pushed for NBCU to follow Disney's lead in pulling back programming licensed at third-party streamers like Netflix and Hulu (in which NBCU still owns a 30 percent stake). Instead, former cable chief Bonnie Hammer will preside over an offering designed to bend to consumers' existing viewing habits: Customers pay only if they don't want ads or if they don't already subscribe to cable.
Now, Hammer's ability to build an OTT brand will be put to the test as she, Burke and the newly promoted Mark Lazarus and Jeff Shell determine the right balance of library content and original programming. That consortium could make the argument that, because their service is free, they won't need to fill it with as many originals as Disney, which is stockpiling shows based on such beloved properties as Star Wars and High School Musical. But one top TV agent notes the challenge of avoiding churn, arguing that "10 original shows doesn't get you to first base in today's world."
NBCU does have a broad pipeline to pull from, including cable producers UCP and Wilshire Studios. Meanwhile, one insider suggests that the recent executive shuffle within DreamWorks Animation, already a big supplier to Netflix and Hulu, was ultimately about realigning it as a top producer of movies and series for the streaming service, as CBS Films is now for CBS' OTT platforms.
There's also still a question about how much live news and sports will factor into the service. Though Burke indicated they will be part of the mix, the sports piece could become especially challenging given the restrictive nature of existing rights deals and risk of cannibalizing existing subscription business Gold, which live-streams cycling, figure skating and other top sports.
Burke was careful to call the new service "just another buyer," suggesting that its launch won't limit the options for creatives tied to NBCU, but Hammer has acknowledged that there's a ticking clock on the "frenemy relationship" that the entertainment companies have with the streamers. "They need you and you need them right now, but at some point it's going to be a true a conflict of interest as opposed to just conflicting interests that you can somehow work around for a while," she told THR in November. "My concern is what happens when it gets to the point where we should not be feeding them content, we should be feeding our own systems content."
Lesley Goldberg, Paul Bond and Borys Kit contributed to this report.
This story first appeared in the Jan. 16 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.