PARQOR Monday AM Briefing #42

The stories and trends in OTT streaming you *need* to know for this morning & the week ahead

Good morning,

First, a reminder that you are receiving this week’s Monday AM Briefing from Substack (and not Mailchimp) because I will be sending all PARQOR mailings from this Substack - parqor.substack.com - for the next two to three months.

Second, I created a coupon 90DAYS on both Substack and Memberful that will give a 33% discount for one year or $33.50/month, to any subscribers wanting to upgrade to Member Mailings.

The 90-day window for the offer expires on May 16. Click below for discounted access to last week’s Member Mailing about “Rethinking the Long-Term Value of Original Content in Streaming”, and all Member Mailings since November 2019.

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A Short Essay on NBCU’s Possible New Streaming Service

After Friday’s “Mic Drop on Visionary vs. Fiduciary Framework” essay, a reader asked me, “How is this framework applicable in my day-to-day?” (NOTE: the reader is a journalist).

I think that’s a reasonable and fair question. The short answer is, focus on objectives, and focus on incentives.

You are identifying a company’s stated business objectives, and leveraging all available information to determine whether the company and its executives are incentivized to achieve those objectives.

The longer answer lies in a helpful recent example is Business Insider’s Claire Atkinson report from Friday that “NBCUniversal has discussed a new subscription video-streaming service separate from Peacock” ($ - paywalled).

NBCUniversal chief executive Jeff Shell has recently held conversations about the potential for a Universal-branded subscription video service, according to two people familiar with the talks.

While the conversations are in the early stages, the rationale behind such a plan would be to grow globally and compete with tech giants Netflix and Amazon as well as Disney and AT&T's WarnerMedia.NBCU last year launched Peacock, which is primarily a free-ad supported streaming service with a paid, ad-free tier.

But while Peacock is a familiar icon to American viewers, the brand name means little to viewers around the world.

Objectives

There is an obvious objective here: to solve for the fact that the Peacock brand-name is U.S.-centric and therefore cannot scale globally.

For NBCU to have a service that scale globally “and compete with tech giants Netflix and Amazon as well as Disney and AT&T's WarnerMedia”, it needs a more recognized brand than “Peacock”. Both Atkinson and Jessica Toonkel of The Information have reported “Universal Stream” is the brand that is being discussed, but it already faces conflicts with Universal brands overseas.

There also seems to be an implicit objective lurking in both Atkinson’s and Toonkel’s reporting: the premium, ad-free tier on Peacock is underperforming, it has become a pain point, and therefore NBCU needs to pursue an alternative model or models.¹

Toonkel told us a few weeks ago:

…data from an internal NBCU presentation viewed by The Information showed that Peacock recently had only 11.3 million “monthly active ad-supported accounts.” (Active accounts are households and can include multiple viewers). A Peacock spokesperson said the 11.3 million figure was low.

The data also suggests that Peacock’s priciest $9.99 tier that doesn’t carry ads only drew 4% of people signing up to use Peacock. Most viewers watch either the free tier or the $5 a month tier with some ads.

That means Peacock is reliant on the ad market to generate revenue for streaming—where it competes with giants like YouTube and the TV networks—whereas Netflix, Disney+ and HBO Max are all ad-free and rely on subscribers.

In short, ad sales is a game of scale, and the available data tells us that Peacock has not yet reached the scale to win that game. At 11.3MM active households, it is at less than 10% of the 120MM households which streamed YouTube or YouTube TV on their TV screens last December, alone. At 4% of “people signing up” to use Peacock, that is either 452K paid subscribers (of 11.3MM households) , or 1.32MM paid subscribers (of 33MM registered users), which is 3% of the near 40MM U.S. subscribers Disney signed up between November 2019 and February 2021.

Looking at NBCU’s past and proposed objectives for Peacock, it is clear Peacock has had a disappointing first year and has reached a crossroads.

Incentives

Who owns the vision for Peacock at a crossroads?

Toonkel tells us that the original vision for Peacock - News, Sports, and Entertainment - was former NBCU CEO Steve Burke’s. But now, new NBCU CEO Jeff Shell believes that “NBCU should try and build the pricier subscription tier of Peacock’s business”.

So the question becomes whether Shell is incentivized by Comcast to be a fiduciary executive - constrained by the objectives of his predecessor to solve for Peacock - or a visionary executive who is empowered to spin out the subscription-only tier of Peacock towards his more international vision of the streaming opportunity.

NBCU - meaning, Comcast - “would need to spend billions of dollars to launch a new subscription streamer” to build an additional subscription streaming service focused on premium content and movies. That is a constraint both on Shell as a fiduciary executive - he has to get approval from Comcast for the investment - and a constraint if he wants to use this crisis to transform into a visionary executive.

Shell would also need to solve for the fact that both Peacock and “Universal Stream” require more premium original programs. This is a pain point for NBCU given the impact of the pandemic and cord-cutting on its cable business and production schedules: it has a lot of its premium content exclusively on Hulu, like The Real Housewives franchise, and some which it shares with Hulu, like Keeping Up with The Kardashians and Modern Family.

Atkinson reports NBCU may get this content back at some point before 2024 if Disney buys Comcast out of Hulu before then (which seems to be on track to happen). So Comcast may find a solution for premium content on Peacock before 2024, or it may not.

Jeff Shell: Visionary or Fiduciary?

If Comcast is not sold on Shell’s vision to solving for Peacock’s shortcomings with a new streaming service, then what will Shell do? What is Shell incentivized to do?

Jeff Shell has not built a career as a digital media visionary. So, we can reasonably assume he is not incentivized like WarnerMedia CEO Jason Kilar, who has a $49MM stock award over the next three years.

In other words, Jeff Shell is not NBCU’s digital visionary executive - that role falls to Comcast’s Direct-to-Consumer Chairman, Matt Strauss. This leaves Shell as a well-compensated, C-Suite fiduciary executive with his choices constrained by the shortcomings of his predecessor’s objectives, and by what Comcast wants to do with NBCU.²

How invested is Comcast in keeping NBCU? As I wrote two weeks ago, one signal is they seem to be more invested in scaling their Flex platform software than in Peacock.

We do not have a complete picture nor complete information. But with the Fiduciary vs. Visionary framework (and terrific reporting from Claire Atkinson and Jessica Toonkel), we can at least surface key objectives, and we can surface additional evidence of whether they are incentivized to solve the problems around those objectives.

The evidence, although incomplete, suggests NBCU executives are not incentivized to solve for Peacock’s problems, alone So, we need to shift our focus on Comcast for how they are going to figure out the future of NBCU and Peacock, and pay attention to what they say and do.

Notably, this is the same question on which the WarnerMedia-NBCU merger speculation has been focused.³ With Peacock at a crossroads, maybe it’s time to imagine an NBCU spin-off from Comcast.

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Must-Read Monday AM Articles

• Kelsey Sutton of AdWeek has a good piece on the dilemma to rebrand, or not to rebrand, that streamers like Peacock and Disney+ face (free- registration required). Anna Nicolaou of The FT reported that WarnerMedia will launch its HBO Max streaming service in Europe this year, but cannot bring the streaming service to the UK, Germany or Italy because HBO content and some Warner Bros movies are licensed exclusively through Sky until at least 2025.

• Interesting dynamics in the sports media world: the NFL is seeking over $100 million per year for its data rights that are provided to sports betting companies; and, “early thinking within league circles” suggests the NBA will seek a $75 billion multiyear rights package, up from its current $24 billion deal, which pays $2.6 billion per year. I wrote about the NBA’s data rights deal with Microsoft and streaming strategy dilemma last May.

• On the heels of last week’s $105 billion media deals, the NFL is partnering with Amazon to bring thousands of officially licensed products to Amazon’s marketplace. This will expand what has been a limited supply of licensed products on Amazon, to date.

• Amazon Prime will stream 21 New York Yankees games during the 2021 baseball season, and the first game will be on April 28. As part of its Yankees pact, Amazon will air a new 15-minute pre-game show on its service ahead of the first pitch, featuring a lineup of YES on-air talent. 

• Variety VIP’s Gavin Bridge shared data on how “a new era of sports fan is emerging, with long-term implications for televised games” ($ - paywalled), and TVREV’s Alan Wolk dove into his takeaways from the data.

• Former Legendary Television President Nick Pepper is joining Amazon Studios, and will oversee big franchise properties and overall deals. Amazon Prime Video France has unveiled a slate of originals, live sports such as the tennis tournament Roland Garros, and adaptations of popular unscripted formats.

• CBS and Paramount+ outbid ESPN for the rights to Italy’s Serie A. The broadcast rights run for three years at $75 million per year.

• HBO Max announced a new lead for advertising sales and partnerships, Katina Cukaj, who will become the point person in the company’s ongoing effort to talk to agencies and buyers about advertising opportunities at its cable networks and its new HBO Max.

• HBO Max also announced it had signed Insecure star Issa Rae to a new five-year overall deal that gives HBO, HBO Max and Warner Bros. television exclusive rights to Rae’s work in TV, plus a first-look film deal that spans WarnerMedia brands, including Warner Bros. Pictures Group, New Line and HBO Max.

• WarnerMedia’s Ann Sarnoff confirmed the release of “Zack Snyder’s Justice League” will complete the director’s superhero trilogy, and sees the future of DC as Batman, Superman, the Flash, and other Justice League members popping up on streaming shows, video games, television spinoffs, and big screen outings. But Hollywood is still wondering if he will be invited back.

• Ronnie del Carmen, the Oscar-nominated filmmaker and Pixar story veteran, has moved to Netflix, and writing and developing an original animated feature as part of an exclusive overall deal. Carmen was co-director of Inside Out, making this a big hire for Netflix’s ambitions in animation.

• Netflix Co-CEO Ted Sarandos spoke to The Hollywood Reporter’s Kim Masters about streaming wars, the future of theaters, talent relations, viewership data, and more. Citi analyst Jason Bazinet estimates Netflix loses $6B a year in revenue due to password sharing.

• Disney, announced that Marvel’s “Black Widow” will be available on the Disney+ streaming app the same day it arrives in theaters, which is now set for July 9. Tara Lachapelle of Bloomberg wrote that this announcement threatens theatrical distribution. The Hollywood Reporter reported on how "There's Not Much Theaters Can Do".

• “Rival Peak,” the first-ever interactive AI reality series, had more than 100 million minutes watched on Facebook Watch over the course of its 12-week season. “Rival Peak” also shared a full version of its infographic on Twitter.

• The Hollywood Reporter has a succinct summary of Univision’s strategy with PrendeTV under new CEO Wade Davis, who leads an investor group that bought Univision and is betting on a Pluto TV-like strategy. PrendeTV, a Spanish-language AVOD, is rolling out with a $100MM marketing campaign this week.

• Tubi has nabbed streaming rights to the 1990s children’s hit “Barney & Friends” starting April 9, and continues to emphasize children’s programming to draw viewers. Brat TV, which I last wrote about a year ago, expects profitability on $35 million in revenue this year.

• Digiday wrote about how brands like Pepsi, Anheuser-Busch and others are creating TV shows, and The New York Times wrote about how they are making movies.

• Last, questions about the future of creative on streaming are emerging: The Guardian asked “is Hollywood becoming creatively bankrupt?”, and Spencer Kornhaber wrote about how the trend of revealing pop star documentaries reflects how “Stars Now Understand That Their Destruction Is Our Entertainment”.

1. Last January, my initial take on Peacock was the service was “targeting too many customers to succeed”, and I identified at least five (!) buckets of customers.

2. For comparison, NBCUniversal's Steve Burke got compensation worth $42.6 million in 2019, his final year as CEO, compared with nearly $40.0 million in 2018 and $46.5 million in 2017, according to a regulatory filing from pay TV, media and technology giant Comcast.

3. A merger would give both two streaming services more library and more scale, and could build off of better technology. Moreover, Shell is compensated with both salary and equity, and would benefit from a sale (he would likely own similar or greater shares in the spin-off entity). However, Atkinson also reported that Comcast and AT&T have discussed “how NBCUniversal and WarnerMedia might work together more closely”, but “WarnerMedia declined to move forward on the proposition”.