Mic Drop #36: Peacock & Sam's Club

Comcast/NBCU may bet on third-party "Aggregator 2.0" Bundles to scale Peacock

There are many good reasons to read “Comcast Bets on Its Secret Weapon in the Streaming Wars: The Olympics” from Bloomberg’s Gerry Smith.

This week I’m going to focus on this lone sentence from the piece:

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.

In other words, NBCU believes it may have more success scaling Peacock in an “aggregator 2.0” bundle - which bundles streaming with gaming, music, shopping, etc. - than in a bundle with other streaming services.

I wrote about the challenges of the “aggregator 2.0” bundle in Member Mailing #270: First-Party vs. Third-Party "Aggregator 2.0" Bundles. I concluded:

Third-party aggregators of bundles seem better positioned to drive conversions than first-party aggregators. In this light it is no accident that Disney acquired 20% of its Disney+ subscriber via Verizon, or that Apple is now relying on Verizon to help drive adoption of Apple Arcade.

A third-party bundler with zero marginal costs of marketing multiple services to an existing user base at scale may be better positioned to help a streaming service scale than a first-party bundler attempting to build an audience around a narrow set of interests.

NBCU seems to have reached a similar conclusion about Sam’s Club (40MM+ subscribers) and Spotify (45.8MM Premium Subscribers and 85.4MM MAUs in the U.S.) as bundlers. Sam’s Club already offers a discounted bundle with Showtime, and Spotify offers a discounted bundle with Hulu.

So, first, a quick mic drop for my prediction about the rapidly growing value of third-party “aggregator 2.0” bundles to legacy media streaming services seeking scale:

Second, Comcast’s options for bundling are fascinating, and worth quickly diving into.

If NBCU Bets on Aggregator 2.0 for Peacock…

The Olympics and “doubling down on investing in content that our consumers like” are the two big bets that Comcast/NBCU are making on growing Peacock, according to Gerry Smith’s article.

But both bets require first-party and/or third-party bundling to scale. What’s uniquely interesting about Comcast/NBCU is that it positioned to make three completely different bets on bundles.

The first is third-party “aggregator 2.0”, bundles above. NBCU hasn’t made that move yet, but the economics and the access to audiences at scale suggest they will make one or more of these moves.

The second is the MVPD-type bundles in streaming: Peacock is bundled into Xfinity X1 pay-TV platform (~20MM or two-thirds of Comcast’s 31MM households) and the Flex broadband bundle (3MM households).

The third is PARQOR Hypothesis-type bundles, perhaps best explained by Disney CEO Bob Chapek at May’s JP Morgan Global Technology, Media and Communications Conference (transcript here):

Never underestimate the power of the Disney+ bundle because it is a very, very powerful machine and a great value for consumers.

And then just again, the shifts in consumer behavior where people, if they want to stay home and watch a movie, they want to stay home and watch a movie and they don't want to be coerced into doing something that they don't want. I think you've got all those things. Plus our - sort of our secret weapon, which is we've not had Disney+ operating in any sense in a full robust way while our parks have been operating, right? Because as soon as Disney+ kind of got really going, our parks shut down because of the pandemic. And so for the very first time, we've got the opportunity to take our original direct-to-consumer business, which is our park business, and use it for our newest direct-to-consumer business. And we've got tremendous amount of information on our consumers from our parks business and what would happen if we married that and actually mine that data to help people subscribe to Disney+ knowing what we know.

Comcast is in a somewhat analogous position to Disney with the amount of information on its consumers it has from both its Universal Theme Parks and Peacock. Meaning, there are logical overlaps between Universal content, Universal Theme Parks, and Peacock that offer a “tremendous amount of information”, and have yet to be truly exploited by Comcast/NBCU with Peacock.

So, it is notable that last week it started making moves to do so:

Comcast Corp.’s new streaming service Peacock is about to get a big boost from sister movie studio Universal Pictures.

Starting in 2022, theatrical releases from Universal—including the next “Jurassic World” and new “Halloween” movie—will have their TV debut on Peacock, the streamer launched by its parent company last year.

The movies will appear on Peacock no later than four months after their theatrical premiere, joining other studios drastically shortening the length of time they typically wait to make their biggest releases available on the small screen. But it also gives Universal a much-needed advantage over its streaming competitors when every studio’s biggest releases are made available as soon as possible.

This may be why Comcast continues to preach its patience with Peacock to investors.

If Disney-like opportunities exist between Peacock and Universal Theme Parks, the PARQOR Hypothesis tells us this is the right direction for a 21st-century media business to be headed towards.

In this light, if Comcast needs to be slower and more methodical than other media companies to reach a PARQOR Hypothesis-type objective, so be it.

Their aim seems true.