The Peacock Flies on Content, Data & Ads

Why the evolution of the Peacock species?

In 2019, NBC Universal and Comcast introduced their own species of video on demand (VOD) service, Peacock. This followed with adapting their content delivery value chain from only TV (cable and broadcast) to direct to consumer (D2C) and TV. This unique content delivery evolution to direct to consumer was triggered by the new media consumption habits.The parent company, Comcast, which has the most extensive base of cable and internet subscribers in the US, noticed the rapid acceleration of digital video viewing and deceleration of TV viewing from 2015 to 2019. The combination of cloud services, 4G technology, and growth in smartphone’s processing power created a ripe environment to create superior video alternatives to TV. Netflix, YouTube, Amazon and Facebook became the dominant species (lions and tigers) of digital videos; generating most of internet users’ video consumption on Comcast’s internet traffic terrain.

The shift in video consumption from TV to internet polluted Comcast’s business model creating the following environment conditions:

• Cable subscribers decreased from 24 million to 21 million by the end of 2019 (Cord Cutters)
• Internet subscriber profit margins reduced, due to increased costs for internet video usage
• NBC Universal TV Ad inventory declined as ad dollars shifted to YouTube and Facebook
• NBC’s content, The Office and Jimmy Fallon, were successfully being monetized by competing for digital platforms (YouTube and Netflix)

Also, Comcast was unable to tax or monetize the “lions and tigers” of video traffic on their estate, because of Net Neutrality legislation. With tentative open access to the internet and forecasted growth of digital video viewing through 2025, other species of D2C video-on-demand services are migrating to Comcast’s internet territory.

Each of these species is taking their own strategic approach (subscription or ads) of trying to attract video consumption away from the dominant species, and incubate another high margin “crop” (product) to diversify user consumption outside of the internet ecosystem.

With a hyper-competitive environment in video consumption’s jungle, NBC Universal and Comcast are seeking to best position for Peacock to thrive in digital video viewing. They are doing this by leveraging their core capabilities: NBC’s content library and advertising expertise, and Comcast’s territory ownership (internet & cable delivery) and data capabilities.

How will the anatomy of the Peacock be arranged?

Peacock’s primary survival mechanism in the digital video landscape will be its content. The VOD service will have access to NBC’s storied library of 15,000 hours of broadcast and movie theatre content. Both forms of content are usually meant to appeal to the broadest swath of tastes, themes and narratives throughout a body of people (not niche). Hence, NBC has created a repository of uniformly agreed-upon movie and TV show hits. Among which are Fresh Prince of Bel-Air, American Pie, A Different World, This is US, Friends, Fast & Furious and SNL. Late-night TV talk shows and investigative news programs, such as Nightly News, Dateline and Jimmy Fallon, became destinations to improve one’s knowledge (and sense of humor) of worldly events.

Consumers are also able to find the most famous American and global sports to celebrate their fandom, as NBC has TV rights to the Olympics, Sunday Night Football, Premier League Soccer, Notre Dame Football and golf tournaments. More than just producing content, NBC has a long history of successfully programming content to create a “lean back” experience. NBC has over 20 years of experience in structuring some of the most popular programming blocks to reach targeted audiences:

Not only did this format reduce consumers’ cognitive load in finding content relevant to them, but it also allowed advertisers to precisely target audiences (demographic) by purchasing ad inventory during those programming blocks. Drawing inspiration from NBC Universal’s programming expertise; Peacock will feature daily playlists of content to ease the use of consumers finding a digital video that is relevant to them.

The combination of broad narrative accessible content and daily playlists for specific audiences and tastes will generate massive video consumption for Peacock, which will, in turn, lead advertisers in desiring the Peacock to adorn their products on the digital video landscape (generating ad revenue).

The monetization formula above worked seamlessly for TV advertisers because the requirements for audience data was only age and gender. Still, on the digital video landscape, a more productive set of data is required to win advertisers over. Ad dollars not only moved to Facebook and YouTube because of content views. The rich ad data, measurement, targeting, and simplified buying tools (programmatic) made it easy for advertisers to reach a specific audience (age: 35–44, city; New York, gender: female, college: yes). Comcast, who patrol’s the digital video activity on its territory, has long been envious of YouTube and Facebook’s success with ads, because they, too, have just as much data on consumers.

But Comcast and NBC Universal had a fragmented ad buying experience between TV and digital, limited targeting and measurement capabilities, and an antiquated ad buying technology. This lead Comcast (data capabilities) and NBC Universal (ad salesforce) to combine their expertise to create a new ad-buying tool called One Platform, an ad-buying platform across TV, desktop, mobile and other devices. With this tool, advertisers can target specific areas on Peacock to reach audiences and optimize campaigns for frequency across programs and devices.

Although the new tool gives advertisers relevant data and simplifies the ad buying process, advertisers wanted more than their products showcased on Peacock, but the ability for users to take action to buy the products. Hence, to draw advertisers away from the “lions and tigers” of digital video viewing, NBC-along with Peacock — is introducing a new product called “Shoppable Ads” that connects the programming on users’ smart TV with a shopping experience on their phone via QR codes, to take action to purchase products. With the organs-content, product, and ads — in place to create a Peacock VOD species, the question remains is how does Comcast & NBC Universal structure the anatomy (price & package) of the Peacock to stand out from other species on the digital video landscape.

What will the Peacock species be?

Roughly 70% of US consumers have one or more video streaming subscriptions; however, nearly half of US consumers expressed frustration with the number of subscriptions required to access the content. Believing that multiple content subscriptions puts them on par with their cable spend per month. Some consumers are now considering ad-supported video services, whether TV or digital, but they are incredibly unsatisfied with the ad load per hour (8–16 minutes). Understanding these consumer pain points, NBC and Comcast strived to package the Peacock service to address “subscription fatigue” and advertising nausea from the heavy ad load.

Structuring Peacock’s anatomy in this format will drive the following business implications across NBC Universal and Comcast:

• Ensure high video consumption with a free, and low price point, to position Comcast to monetize traffic on its terrain, and mobile
• Reduce “cord-cutting” to preserve Comcast’s estate in the cable ecosystem by creating a lower price point for cable subscribers
• Shift video traffic away from Netflix, YouTube, Facebook and Amazon, to improve margins for Internet services
• Build a data substrate on digital viewing habits to offer consumers other services from across the Comcast ecosystem (Xfinity security)
• Unique pricing strategy based on core assets that can be scaled to international markets (SKY TV)

With a strategy set, the Peacock will purposefully fly (launch) on to the digital video landscape during the Olympics, as this will maximize the awareness of the service. Also, due to NBC’s relationships, sponsors and other Cable & Internet providers will drive awareness to support the success of the new species in other digital environments. But once the Peacock lands on the ground, into the digital video jungle, we will then see if the “Peacock” can indeed survive.

Originally published at http://arthurtyson3.com on February 6, 2020.