NBC’s Peacock Is Ready to Fly, But Roku and Amazon May Clip Its Wings
(Bloomberg) -- In January, during a presentation at Rockefeller Center, NBCUniversal executives expressed confidence their new streaming service, Peacock, would be widely available when it debuted this summer. Distributors would want to offer the app, they said, because NBC would be promoting it and it would be stocked with popular TV series, including “The Office” and “Saturday Night Live.”
Most importantly, it would be free. “I have a feeling we’re going to get broad distribution,” Steve Burke, chairman of NBCUniversal, said at the event.
But as Peacock prepares to roll out nationwide on July 15, the app is still missing some key distribution partners. NBC has yet to reach agreements to offer the service through Roku and Amazon Fire TV, which together control about 70% of the U.S. streaming-TV-device market, according to Parks Associates. Roku alone currently has about 40 million active users. Peacock has also yet to announce a deal with the second-largest U.S. internet provider, Charter Communications Inc.
Recently, the debut of another big streaming service was marred by similar problems. More than a month after its launch, HBO Max is still unavailable on Roku and Amazon Fire TV, creating confusion among consumers and slowing its effort to recruit subscribers.
Wide availability is crucial for an ad-supported service such as Peacock because the more eyeballs it can attract the more it can charge advertisers. NBC has said it hopes Peacock will reach 30 million to 35 million accounts by 2024 and stop losing money by its fifth year.
In an interview, Peacock Chairman Matt Strauss said NBC is having “productive discussions with everyone” about distributing Peacock. “Our hope is that all platforms will do right by their users,” he said.
In a statement, Roku said it is “focused on entering into win-win distribution agreements” with all of the new streaming video services “as part of their launch strategies.”
NBC, Roku and Amazon declined to discuss the details of their negotiations.
A major sticking point is that both Roku and Amazon would like to control a portion of Peacock’s advertising inventory. With no more than five minutes of ads per hour on Peacock — less than half of the typical amount on traditional TV — NBC is unlikely to want to share its limited commercial time with Roku and Amazon. NBC has already sold hundreds of millions of dollars of air time to its initial roster of Peacock advertisers, including State Farm, Target, Eli Lilly, Apartments.com and Unilever. According to CNBC, both Peacock and HBO Max are also in disputes with Amazon over who controls user data.
The tense negotiations are a sign of how the streaming era has flipped the dynamic between programmers and distributors. For years, cable, satellite and phone companies paid a fee for the right to carry dozens of TV channels, which they then resold as part of broader bundles of programming.
Roku and Amazon, which are emerging as two of the central gatekeepers of the streaming era, take a different approach. The companies don’t pay to host streaming apps on their platforms. Instead, they collect fees from the apps in exchange for promoting the services to their sizable user bases. At the same time, Amazon and Roku angle for a share of each streaming service’s subscription revenue or advertising inventory and, in some cases, ask media companies to supply free programming to stock their own ad-supported streaming services: The Roku Channel and Amazon’s IMDb TV.
At the event in January, Strauss said that distributors would have an incentive to carry Peacock in part because NBC would be spending heavily to market its new service. But given there’s only five minutes of commercials on Peacock, “we’re not looking to do any revenue share on the advertising,” Strauss said at the time.
Rich Greenfield, an analyst at LightShed Partners, has said that NBC’s unwillingness to split ad sales “will be an interesting battleground” to keep an eye on, as the intensely competitive video-streaming industry continues to evolve.
Because it is owned by a giant cable company, Peacock is guaranteed to reach a decent-sized audience right out of the gate. Comcast Corp., which owns NBCUniversal, has about 21 million video customers. In May, Comcast said 1 million customers had received Flex, a Roku-like device the company offers to cord-cutters to stream apps. Peacock debuted to Comcast subscribers in April, and the app is promoted on Comcast’s video platforms. Peacock has also announced distribution deals with the cable company Cox Communications Inc., TV-makers LG and Vizio, Microsoft Xbox and the two main mobile app stores, Apple and Google.
Peacock has more than 600 movies and 400 TV series, including several original series. But production on much of the new programming has been delayed due to the coronavirus pandemic. Peacock will also be the exclusive streaming home for new Universal films, like the ninth “Fast & Furious” movie and the third “Jurassic World.” A basic tier of the service will be free for everyone. Premium tiers will cost $4.99 per month for more programming or $9.99 per month without ads.
Peacock has aggregated programming from a wide range of other media companies. NBCUniversal recently announced a deal with ViacomCBS Inc. allowing Peacock to offer popular Showtime series such as “The Affair” and old Paramount movies like “The Godfather.”
“We didn’t call the service ‘NBC Plus’ for a reason,” Strauss said. “Because we always believed it could be bigger.”
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