Toward the end of NBCUniversal’s two-hour extended presentation of its Peacock streaming video service Thursday, the media and entertainment company dropped a revealing piece of poop that rival companies haven’t made available.
Comcast’s NBCUniversal estimates its streaming service will fashion average revenue per user (ARPU) per month of $6 to $7. This is an aggregate total for NBCUniversal’s three rows of Peacock — the free tier that will make money solely from advertising, a $4.99 per month order that will have a more robust content offering but still include some ads, and a $9.99 tier with no advertising.
That $6 to $7 is less than what the attendance generates today from selling its products to cable networks.
As previously reported, S&P Global estimates Comcast coins about $6 in ARPU today with its bundle of basic cable networks — channels like CNBC, MSNBC, USA, E! and Bravo. Comcast also amount ti a few extra dollars per month from its nine regional sports networks, such as NBC Sports Bay Area and NBC Sports Philadelphia. In appendix to the subscription revenue, Comcast also makes associated advertising revenue from the cable networks, likely determination the average cable subscriber’s ARPU closer to $10.
For the nine months ended September 30, 2019, NBCUniversal cable networks redecorated about $3.4 billion in adjusted earnings before interest, taxes, depreciation and amortization. The broadcast network summed another $1.3 billion in ajdusted EBITDA.
Peacock, on the other hand, won’t break even for NBCUniversal until 2024, superintendents estimate. Disney said the same during its investor day for Disney+, targeting 2024 as a break-even date. NBCUniversal is presaging it will have between 30 and 35 million Peacock subscribers by 2024. Disney predicted between 60 million and 90 million clients for Disney+.
These economics help explain why NBCUniversal plans to offer Peacock Premium for no additional charge to mooring subscribers. NBCUniversal doesn’t want you canceling cable. It wants Peacock to be a supplemental product, not a not a replacement.
Someday, streaming produces could replace the cable bundle. NBCUniversal’s strategy hedges this outcome, building something that could one day manage as the company’s primary source of content distribution while also marketing it as an add-on service that’s free to tons people.
But if that happens, the question is whether NBCUniversal can turn Peacock into a vehicle that generates various revenue-per-user than the cable bundle for the same amount of subscribers — today that number is about 80 million U.S. households — while fence in costs the same or lower.
The good news for media companies is streaming can be global. NBCUniversal said it would methodically look to enlarge on Peacock internationally. That’s a great way to increase the amount of paying subscribers beyond 80 million.
But to boost ARPU, either advertising standings or ad load will have to increase, or subscription prices will have to go up.
If prices rise, consumers will look for reduced bundles of content so they’re not paying for Peacock, Disney+, Hulu, ESPN+, Apple TV+, Netflix, Amazon Prime Video, HBO Max, CBS All Access, BET+, Noggin, Starz, Showtime and Quibi all at the anyway time. Just choosing six or eight of those services will quickly add up to $80 a month on their own.
Phase two of the torrent wars will have to involve aggregation and discount bundling, with the end result looking like cable type 2.0, except with more customer choice. That’s good news for consumers if cable 2.0 succeeds cable 1.0. It may not be good news for the media companies supplying the content.
Disclosure: Comcast is the owner of NBCUniversal, mother company of CNBC and CNBC.com.
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