Comcast bets on its secret weapon in the streaming wars: the Olympics

NBC launched Peacock nationwide in July 2020, but couldn't market it with the Olympics then, as planned, due to the pandemic.

Comcast bets on its secret weapon in the streaming wars: the Olympics

Inside 30 Rockefeller Plaza in New York last month, NBC executives revealed their long-awaited plan to use the Olympics to supercharge their streaming service, Peacock.

NBC launched Peacock nationwide in July 2020, hoping to leverage the spotlight of its Olympics broadcast to drive sign-ups. But the pandemic postponed the Tokyo Games by a year, denying Peacock a key marketing opportunity as it joined the fiercely competitive field.

Now Peacock is about to enter the most crucial phase in its short existence, beginning with the Olympics later this month. At the same time, Comcast executives are still wrestling with big decisions about Peacock’s long-term future, like how ambitious they want to be internationally and how to persuade more people to upgrade to its paid tier.

At the event in June, seated on a stage in front of reporters and other NBC executives, Matt Strauss, who oversees Peacock, gave a demo of what users will see when the Olympics begin July 23. There will be live track and field, gymnastics, curated highlights, medal counts, original programming and even commentary from Snoop Dogg and Kevin Hart.

While all of that will be free to anyone who downloads the Peacock app, one piece of the coverage will not. Live streaming of the USA men’s basketball team, typically one of the Olympics’ most popular sports, will only be available to subscribers of Peacock Premium, which costs $4.99 a month.

It’s a notable exception.

Before Peacock’s debut, NBC executives touted how the service would stand out from rivals because it would be free and supported by ads. But as the service enters its second year, NBC is nudging viewers to start paying monthly subscription fees by putting more high-profile programming behind the paywall, including every season of “The Office,” English Premier League soccer, the Stanley Cup finals, “Yellowstone” and the sequel to the animated film “The Boss Baby.”

On July 6, NBC announced it is pulling its Universal Pictures films from HBO and will make Peacock their online home after the movies play in theaters. Those movies will only be available on the paid tier. The move will take effect next year.

Peacock had about 42 million sign-ups as of late April, with about one-third, or 14 million, actively using the service each month. Of the 14 million, only about 20% pay for it, with the remaining 80% getting the streaming service for free, either by using its basic tier or through a deal with a cable operator, according to a person familiar with the matter. Attracting more paying subscribers will help Peacock meet the financial goals of its owner, Comcast Corp. 

Entering the Olympics, Peacock sits in the second tier of streaming services, far behind the leaders of its field. Netflix Inc. had about 208 million subscribers worldwide as of March, while Disney+ had almost 104 million. Some in media have suggested that NBCUniversal is too small to support a global streaming service after Discovery and WarnerMedia announced plans to join forces.

Comcast has said it will invest $2 billion in Peacock in its first two years. Comcast’s chief financial officer has suggested that the company may not be willing to put more money into Peacock much beyond 2025 — the year that the service is expected to break even. 

In an interview, Strauss said Peacock is airing far more programming than when it debuted, including 60 original series arriving in the second half of this year. He predicted the Olympics will be a “meaningful driver” of growth. Compared with a year ago, he said, “I feel like we’re in a much better place with the service.” 

In its second year, Peacock will continue to look for ways to entice users to begin paying for the service. “Right now our focus has been more on scale, but one thing we do well as a company is upsell people,” Strauss said. “That is an opportunity for us in the future.”

Executives at Comcast are still grappling with major questions about what Peacock’s future might look like. In April, Comcast CEO Brian Roberts held a big strategic meeting about Peacock with the division heads at NBCUniversal. Over Zoom, they took turns pitching Roberts on what more could be done if Comcast poured additional money into the streaming service.

According to a person familiar with the matter, NBCUniversal CEO Jeff Shell wants to spend more on Peacock than his predecessor Steve Burke had initially envisioned. But at an investor conference in June, Shell emphasized that Peacock is just one of many platforms for the company, saying it “is misunderstood sometimes as being a separate business.”

“It really isn’t,” he said. “It is a complementary back end to a lot of our businesses.”

The timing of Peacock’s debut last July proved to be both an opportunity and a challenge. Many people binged on streaming services like Peacock while confined to home during the pandemic. But the pandemic also delayed the production of many of Peacock’s new series. One high-profile show at Peacock’s launch, “Brave New World,” was canceled after a single season. 

Comcast is starting to take bigger swings with Peacock. Earlier this year, the service agreed to pay $200 million a year on average to be the exclusive home of the WWE Network, an online video service owned by the professional-wrestling company World Wrestling Entertainment Inc. Peacock will simulcast “Sunday Night Football” games this season and show one exclusive NFL game each year under a new rights deal that starts in 2023. And Comcast has started shifting several paid video packages for sports including motocross, figure skating and soccer to Peacock.

In its second year, Peacock will continue to experiment with new release strategies, such as airing the show “Below Deck Mediterranean” on Peacock a week before it runs on the cable channel Bravo, Strauss said. 

To expand its reach further, NBC has considered offering Peacock in a bundle at a lower price to members of Sam’s Club and to students who subscribe to Spotify, one person said.

Perhaps the biggest long-term question for Peacock is just how ambitious Comcast wants to be globally. Executives are planning to expand Peacock outside the U.S. sometime in the next year, likely starting with European markets dominated by Sky, a pay-TV provider that Comcast also owns. The move would require more investment, including buying international rights to big shows. Netflix still has the rights to “The Office” outside the U.S.

Domestically, NBC has promoted Peacock as the home of “The Office.” The show arrived on the service on Jan. 1. after NBC agreed to pay $500 million over five years to wrest the U.S. rights away from Netflix. So far this year, the most popular series on Peacock has been “Saturday Night Live,” according to Parrot Analytics, a startup that measures audience interest in TV shows. “Saturday Night Live” has almost doubled “The Office” in terms of viewer demand, according to Parrot. Meanwhile, the animated series “Curious George” has been Peacock’s most-watched original series, followed by “Girls5eva,” a musical comedy co-produced by Tina Fey.

In October, Comcast’s commitment to Peacock will face a major test when negotiations commence for the rights to show the English Premier League. Comcast first acquired the rights in 2013 and renewed its deal in 2015 through the end of the upcoming 2021-2022 season. The matches have been one of the biggest drivers of new customers to Peacock, and Comcast is expected to try and retain them. But the price will likely increase significantly from the previous deal, which costs more than $150 million a year. Rival media companies, including ViacomCBS Inc., are expected to make competing bids.

Mark Lazarus, chairman of NBCUniversal Television and Streaming, said that Comcast is “100%” committed to Peacock and that CEO  Roberts often joins Peacock strategy meetings “to talk about what we should be doing differently.”

“We’re doubling down on investing in content that our consumers like,” Lazarus said.

Peacock could get a boost early next year when NBC airs both the Super Bowl and the Winter Olympics in the span of a few weeks. Meanwhile, executives at the company will be watching closely to see how much the upcoming games in Tokyo jumpstart Peacock’s fortunes. Dan Ives, an analyst at Wedbush Securities, estimates that NBC’s Olympics broadcast could increase the service’s user base by 30%.

“I view it as a watershed event for Peacock,” Ives said.

--Bloomberg News