An emphasis on free content and paid and ad-supported tiers (without the podcasts)


I posted less last week because I was traveling two out of five days, and that threw me off schedule for writing. I wanted to write more about Peacock’s free streaming service last week but there simply was not time. Then, this afternoon,. I witnessed not one but six to eight planes fly along the Montauk shoreline marketing Peacock while I was driving out East.

Let’s consider it creative inspiration: I will use this Monday AM newsletter to write my initial take on Peacock’s launch.

My Initial Take on Peacock’s Free Streaming Service from January

When NBCU debuted Peacock back in January, I argued that Peacock “it fails basic value proposition design because it has too many customers and a confusing value proposition.” I thought its presentation was trying to please too many customers: consumers, brands/advertisers, MVPD /Distribution partners, and Investors.

I argued then:

Compared to Netflix’s single consumer, DTC model, Peacock has laid the foundation of a messy web of target customers for NBCU to keep happy with Peacock’s value proposition. They have created for themselves the problem of “serving too many masters”.

None of those executives are agreeing to that.

I focused on the low projected ARPU of $6-7 for Peacock, 40% below the $10 monthly ARPU Comcast makes from cable subscribers, according to CNBC. An ARPU as low as that can result in two externalities, or unforeseen consequences:

Peacock’s Customer Acquisition Cost will go up to wipe out profit margins, if not drive losses: as ARPU drops, Customer Acquisition Costs for marketing effectively remain static, so it become more expensive to find subscribers who will pay what the business needs….

A second externality is low ARPU will impact negatively the ability to retain and hire talent. I argued:

Peacock has a fifth bucket of customers: engineering and managerial talent. If they cannot attract and/or retain that talent, the complicated task of serving the four other buckets of talent becomes exponentially more difficult.
So, at some point, low ARPU kills the ability to market and the ability to attract talent.

Fast Forward to July 15, Peacock’s Launch Day

I downloaded Peacock to my phone last Wednesday. After exploring with it and checking out SNL content on its Channels tab, I concluded I am not a customer for Peacock, yet.

That is not a knock on Peacock, or a Quibi-type complaint about a service launching without a value proposition. Rather, it is a statement that concurs with Chairman Matt Strauss’s business logic for the service: they are a free service that is premium. Strauss tells Business Insider:

“This notion of launching a free service that’s premium, we think is incredibly relevant. It’s more relevant now than even where we thought six or so months ago….

There’s just a lot of friction that we were identifying in the market. We saw through research that people were getting frustrated with how many services they had to subscribe to. They were kind of popping in and out of these services, based on whether they want to watch a buzzy original … or they might’ve been getting it on a promotion and not realizing it was a promotion.”

In other words, Peacock is not yet clear on who their target customers are, or the types of offerings which will convert and retain those customers to paying subscribers. An emphasis on “free” helps them to reach the type of scale where they can learn a lot about who their target customers are.

Strauss makes an interesting point to Deadline about how this strategy relates to original content production, in particular:

““We believe we’re going to be able to blanket the country in a way that most consumers are either going to have access to the free version or the premium version for de facto free. If that’s right, then that influences how you drive originals. It means originals are less about driving acquisition. They’re really more about driving consumption.

There’s a much longer-term strategy at work that we’re measuring ourselves against. It doesn’t mean July isn’t important, because of course it is. But we’ve charted a course.”

Put simply, the strategy is that free drives scale and learnings, and originals will drive engagement (“consumption”) and deeper audience learnings.

This mirrors Spotify’s moves in podcast

It sounds a bit like Spotify’s podcast strategy, as the The Business Insider notes. In turn, it invites the question of whether Peacock can find a way to find free original content to drive adoption of its free services like Spotify’s nearly $1B investments in podcasts have.

Strauss’s quotes suggest that Spotify’s model is one they very much have in mind. Even if the Peacock app is not useful to me or other target customers now, Strauss is suggesting its free streaming strategy will drive the evolution of the app and business model, much like podcasts are driving the evolution of the Spotify platform and advertising and subscription models. Meaning, free content will attract users, and paywalled content will convert them into subscribers. The key difference is, Spotify’s approach has been to paywall exclusive content for those free offerings, whereas for now, NBCU seems to be betting on the perceived value of its additional library as the value proposition for converting free users to subscribers.

Even with that nuanced distinction, Strauss’s long term strategy makes Peacock an app very much worth keeping an eye on.

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