Jan 16, 2020 - Economy & Business

NBCU's new streaming service Peacock goes all in on ads

NBCUniversal unveiled parts of its new streaming service, Peacock, to investors in New York Thursday, promising a consumer-friendly advertising experience that would set it apart from its many competitors.

Why it matters: Unlike some of its entertainment rivals, NBCU plans to make its service mostly free to consumers, supporting it through advertising instead. Netflix and Disney, who are considered the two streaming titans to beat, are ad-free.

Details: The investor presentation was led by Linda Yaccarino, NBCUniversal's chairman of advertising and partnerships. Yaccarino stressed that in order for Peacock to work, the ad experience needs to be built for digital TV. She laid out several strategies to ensure that's the case, including:

Low ad load: While most TV shows have an ad load of roughly 15 minutes per hour, NBCU executives say that Peacock will have only 5 minutes.
Effective "frequency caps": Peacock will cap the number of the same ad being aired at a given time so audiences aren’t inundated.
High-quality video: NBCU says it will use new patent-pending technology to ensure that all of the video is high-quality.

By the numbers: Along with debuting its ad strategy, NBCU also revealed its pricing plan. The service will have three pricing tiers:

Free: Ad-supported, with limited programming.
$4.99 a month: Ad-supported with current programming and favorites like "Friends" and "The Office."
$9.99 a month: No ads with full programming, more than 600 movies and 400 TV series.

The streaming service will also debut six new scripted shows from creators including Mindy Kaling, Amy Poehler, Norman Lear and Will Forte. It will also be the only place to stream "Law & Order" and "Chicago Fire."

Live news, sports and early viewing of the late-night shows will be available.

Between the lines: Yaccarino revealed a slew of new ad products and innovations that NBCU hopes will make its streaming service amenable to younger consumers who are growing weary of advertising.

What's new: Some of the ad innovations are brand new with the Peacock launch, like the "trending ads" feature, which places timely ads against trending topics, and "solo ads," which let one advertiser sponsor a single ad within a show episode. NBCU will also allow advertisers to target editorially curated groups of content via "curator ads."

There will also be voice ads, called "on-command ads," that will let users interact with an ad through voice controls on their remotes.

What's included: Some of these innovations, like "shoppable" TV ads and "prime pod" ads (which are longer ads during prime time), have already been tested within NBCU's linear TV advertising channels.
What's expected: Some of the ad products are new to NBCU, but have already been rolled out by other ad-supported streaming services. For example, Peacock will feature "binge ads," for users who watch many episodes of a show in one sitting, and "pause ads," which appear when users pause a show. Hulu has already rolled out both of those products.

The big picture: With more people ditching their expensive cable packages for cheaper, digital TV options, Comcast, NBCUniversal's parent company, needs to ensure that it provides an incentive for consumers to keep buying its services, which also include home broadband.

Peacock will be offered to Comcast cable customers and internet-only Flex customers for free when it launches on April 15. The streaming service will launch nationally on July 15.

Be smart: Peacock's advertising-based strategy will help Comcast sell advertising for its traditional television networks. Its sales team will be able to package these fancy digital TV ads with regular TV ads to help sell more regular TV ads, which are traditionally worth a lot more.

NBCU already houses a powerful advertising team with billions of dollars in ad revenue across digital, mobile, television, audio and streaming channels.

What's next: Thursday's presentation was focused on advertising and the consumer experience more than programming. Investors will want to know more about Peacock's content strategy next.

Our thought bubble: Reports suggest that NBCUniversal only plans to spend around $2 billion on Peacock to start, so it doesn't accrue massive debt building the service. But its competitors, like Netflix, are expected to spend up to eight times as much. In order for Peacock to be successful, it needs to offer it to consumers at a very low price point, which is partly why the service is ad-based.

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