Comcast will spend billions on Peacock

During a Zoom meeting in April, the heads of all the biggest divisions at NBCUniversal gathered to discuss the state of their business. It didn’t take long for the conversation to turn to Peacock, the company’s flagship streaming service.

Peacock has gotten off to a slow start since its debut last April. It has about 14 million monthly users, and about 3 million paying subscribers, according to a report this week by Gerry Smith. Those numbers mean that Disney+ added more subscribers on its first day of operation than Peacock added in its first year. (Comcast has cautioned that Peacock isn’t trying to compete with Netflix or Disney+, but that’s partially because it doesn’t have the resources to try.)

One by one, senior leaders at NBCUniversal gave their pitch for what they could do to make Peacock a more appealing service. Universal film chief Donna Langley talked about how her studio could make original movies. Mark Lazarus outlined the company’s slate of sports rights, and what was coming up, while Susan Rovner mapped out a programming strategy. TV studio boss Pearlena Igbokwe stressed the opportunity to make shows like “Hacks” and “FBI” for an in-house service instead of third parties.

All of these plans had something in common. They cost money. The company would need to add billions of dollars to its programming budget for Peacock, and there was only one person with the power to approve the surge: Comcast Chief Executive Officer Brian Roberts.

Participants and bystanders have slightly different stories about Roberts’s response. Some executives at Comcast say the meeting’s significance is overblown; it was just a long-term planning sessions. Others stress Roberts is Peacock’s biggest fan, and this was his chance to double down.

The disagreement among executives (and confusion among producers and agents) points to a question we’ve all been been asking for the better part of a year: How serious is Comcast about Peacock? The answer is still unknown.

When the service first debuted last April, the answer seemed to be, not very. Peacock was the only new streaming service to debut without a flurry of new original series. While the company blamed the pandemic for disrupting production — and robbing it of the Olympics as a promotional platform — the Peacock never ordered as many projects as its peers. NBCUniversal’s own executives portrayed Peacock as a complementary product to existing services. Comcast, a leading TV provider in the U.S., wasn’t quite ready to stab a stake in the heart of cable.

It’s important to remember that Comcast is a cable and internet provider. Wall Street doesn’t value the company based on NBCUniversal as much as it does how many new internet customers it signed up in the last quarter. In that sense, it has more in common with AT&T or Amazon than Disney and Netflix.

Yet unlike many outsiders that enter Hollywood, Comcast has been a willing and able steward of one of the world’s largest media companies. Under its leadership, NBC ranked as one of the two most-watched TV networks, Universal Pictures was one of the two or three most successful movie studios and its cable networks pumped out unscripted hits. Its theme parks scored with the “Harry Potter” attractions.

The glory days are over. The audience for all of the company’s most valuable TV properties – NBC, USA, Bravo and E! – is in decline. All of its peers are betting their futures on streaming, and over the past year executives at NBCUniversal have recognized that they need to get in the game.

The streaming landscape requires a new level of investment. Netflix will soon spend more than $20 billion in a calendar year on programming. Disney and Amazon aren’t far behind.

Several executives and analysts have speculated that Comcast will spin out NBCUniversal and let CEO Jeff Shell run it as an independent company. People who work at NBCUniversal have said the company would like to merge with ViacomCBS to create a more potent streaming competitor. Or merge with Discovery-WarnerMedia for the same reason.

All of these deals are possible, but they also have serious obstacles. NBCUniversal and ViacomCBS both own broadcast networks, and it’s hard to see the government allowing one company to own both of them. Discovery doesn’t even own WarnerMedia yet.

For the time being, Comcast will try to give customers more reasons to sign up for Peacock. It struck a deal with World Wrestling Entertainment, and moved over sports packages like motocross. It has plans for dozens of original series. In perhaps the clearest sign of its investment, Universal’s movies will now go to Peacock after they leave theaters instead of HBO. Peacock has to spend hundreds of millions of dollars for those rights.

But Peacock will only have the Universal movies for eight months instead of 18 months because Universal split the rights between Peacock and Amazon. Peacock isn’t big enough to afford a full movie deal, nor does it benefit Universal to stick its movies on a service that is only used by 14 million people. So while NBCUniversal is keeping its movies on its streaming service, odds are more people will watch the next “Jurassic World” movie on Amazon than Peacock.

Comcast wants to have its cake and eat it too — a sign that the company is both investing Peacock but not, in the words of Rich Greenfield, all-in.

Maybe it doesn’t have to be. Maybe it’s more prudent to build slowly and manage earnings for Wall Street. But at the moment there are three or four services/bundles that almost everyone has. Netflix is foundational. Disney+/Hulu is a must-have for most people. Amazon is basically free. Those companies have all committed to streaming in a big way.

But the next tier — HBO Max, Peacock, Paramount+ and Apple TV+ — they all have to give you a reason to pay for another service. Within the halls of Comcast, there are powerpoint decks and long-term plans floating around the company touting its ability to target different fan bases, from sports to horror to kids. In other words, Comcast is still working on its pitch. Bloomberg