Comcast Peacock NBC streaming service – is it a yes or a
no? I'm Jenny Rae, the managing director of
Management Consulted, a Bain consultant, and I'm going to break down the business
cases, the business scenarios of, NBC universal, and their focus on the
new streaming service. And I'm going to highlight whether or
not I think in strategy it makes sense for them to go
forward with this kind of streaming service.
So, let's first of all walk through what the two options are
for comcast, and how they would think about evaluation of this. Number one
they've got an option for syndication. So, the office,
and all other resources that are out there in the market, big name and
also a bunch of small main properties that they own –historical and current –and
what they've decided to do is pull back some of those,
if they alternately didn't do that, or if they weren't they weren't calling it
back or they weren't getting dropped, then the valuation of those would be
whatever somebody was willing to pay. And as long as there's a couple of
competitors that are willing to pay for it, that
would be great. One of the challenges is that the competitors,
who are paying for those services, are actually waning a little bit. So you have
prime video, and you've got Netflix, but who else in the market
might be paying for those services. So in different micro markets you have a few others.
However, there's a valuation number – and
it's the value of syndicating everything out to somebody else –
that number is the benchmark. What they are saying,
by going forward with their own platform, Peacock the streaming service,
is that they believe that they can outweigh the revenue –
and actually all of that revenue is pure profit compared to what they're talking
about internally. They're saying that they can outweigh
that by building their own platform. And here's how they do it.
They have some nominal cost, they have a cost to build the tech –and god knows
they should spend some money on doing it and not flub it like they
have historically in the past with user experience.
So, it needs to be actually a decent tech build, but it's still not going to be in
the grand scheme of things a huge expense.
Their biggest marketing expense is going to be acquiring customers.
When they're doing syndication, the customer acquisition happens out there
in the market, or the customer acquisition happened
historically, you still have resident things that are coming back. But
making sure that you've got great content on your platform is one part of
their business that they already have to focus on,
now they also have to focus on getting customers to
a specific platform, and that is going to be
the biggest challenge. That marketing expense I think is going to eclipse what
they're talking about. They're talking about, at their top tier
having somebody be worth $120.00 dollars a year. And so they're gonna have to
market so efficiently, and hold somebody for such a
long time, their lifetime value – their LTV of each of those customers is going to
have to be so high. And with streaming wars intensifying,
they're going to have to have such little churn to actually make that
number worth it. So in many estimates, they're giving out
numbers and this many million people to subscribe,
and this is what we're expecting, and my expectation is that they're
actually pushing those numbers to be really unrealistic. And they are
going to have to focus on so many different things managing the
different stakeholders. So, one of the things that they have done
on the revenue side of the internal process, is they focus on both ads
and customer subscriptions. And essentially what they're saying in an ad
free full catalog is that you're worth 120 bucks at the max.
So, an ad rate per subscriber is going to be somewhere south of 120
bucks per person. So ultimately, their number for
thinking about the way that they're gonna break even on what they were doing
with syndication, is that they're gonna have cost per
customer – the cost of managing the tech, and the cost of
processing your credit card every month, and then the cost of acquiring you –and
they're gonna have to subtract that from that hundred and twenty dollars. And that
net number, that value, times the number of
subscribers has to outweigh what the issues are inside the
syndication market. Now, I'm not saying that it's a terrible
idea across the board, I'm saying I think that it is unlikely that they're going
to match their syndication numbers. I think that is likely that people will
churn too often, they're going to spend a lot of money to acquire them and they're
going to churn off. I think that they're going to under
invest and use their experience, as they have done historically, and I think
that's going to result in a lower adoption rate in the first place.
And I think they're going to disrupt
the basic users with ads, driving down the free subscriber attention,
and also driving down their ad price. So I think they're going to have revenue
compression, and I also think they're going to have cost escalation that's
going to result in a really big issue from a strategy perspective.
if syndication really is dead, then it's
the only option that they have. I'm not convinced that it is .So, if I
were sitting in the boardroom at NBC, I'd really want to make sure that
I felt like those numbers were solid rock and that there would be no risk in
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