Peacock’s Battle for Survival and the Catch 22 of Streaming

0:00This episode is brought to you by CeraVe Hair Care. Scalp is skin. Healthy scalp, beautiful hair. Discover hair care reinvented with dermatologists from the number one dermatologist recommended skincare brand with gentle hydrating and oil control balancing shampoo and conditioner. Formulated without sulfates or fragrance, CeraVe Hair Care is suitable for sensitive scalps and all hair types, curl patterns and color treated hair. Visit CeraVe.com slash hair care to learn more. Available online and in store retailers nationwide.

0:34This episode of The Town is presented to you by AMC Networks. Billy Magnuson and Zach Galifianakis star in the new series The Audacity on AMC and AMC+. Influence rises, people unravel, and CEO meltdowns are business as usual among Silicon Valley elite. Executive produced by Jonathan Glatzer, a writer-producer of Succession and Better Call Saul. Watch new episodes of The Audacity, Sundays exclusively on AMC and AMC+. It is Monday, April 27th. Another quarter, another big loss for Peacock. $432 million, about twice the losses last year in this same period. That's more than$11 billion that the Comcast NBCUniversal streaming service has lost since it launched in 2020.

1:22But Comcast said it is, quote, expected to approach profitability this quarter. Not sure what that means quite exactly. This situation might surprise people in town because it does feel like Peacock finally has been getting there in subscribers. It's at 44 million in U.S. alone. Remember, this is a U.S. only service. And it has shows that people kind of are watching and talking about. The traders made the top 10 in Nielsen for the first quarter of the year. Love Island is huge and All Her Fault was a big hit in the fall. And the Universal Movie Studio, which has been pumping out hits like Wicked and Super Mario.

1:57Those all debut first on Peacock in the U.S., though they then cycle through to Netflix and Amazon pretty quickly. And most importantly, the sports. Peacock accounted for 3 % of all U.S. viewing on connected TVs in February, thanks to the trifecta of the Winter Olympics, the Super Bowl, and the NBA All-Star Game. They all aired on Peacock and NBC. That was a big spike, but the sports have come with a big cost as well. The new NBA deal alone costs$2.5 billion per year for games on NBC and Peacock. And the NFL is about to ask for more money for Sunday night football. And even when people subscribe to Peacock to watch this stuff, they tend to cancel at a rate higher than other services.

2:40According to antenna data reported by Bloomberg this weekend, 9 % of Peacock subscribers churned out each month this year. That means that Peacock has to spend to replace nearly a tenth of its entire subscriber base every month. Not great. So what's going on here? Are we any closer to figuring out the future, if any, for Peacock? We've got Lucas Shaw on the show here to discuss our Monday guy. Today, it's Peacock's legendary February, the aftermath, the huge losses, and the future. From the Ringer and Puck, I'm Matt Bellany and this is The Town.

3:18All right, we are here with Lucas Shaw from Bloomberg. Welcome back, Lucas. When did you get back from D.C.? I flew in last night, a big weekend, went to two MLB games with my dad and my kid, and then experienced a little domestic terrorism at the White House Correspondents' Dinner. Wait, so your kid was in D.C.? He was. He was watching on TV as the whole thing went down. A 10-year-old with his dad in the room, and all of a sudden there's chaos and commotion and me under the table. Luckily, I had reception. I was able to text back and say, I'm okay, but not great. How scared was he when you got back to the hotel room or wherever you were staying?

4:00He was okay. We explained it to him. It's funny how these things get reported. I mean, everyone's dunking on or laughing at that CIA agent, Michael Glantz, for eating his burrata salad during the entire thing. By the way, the burrata salad was pretty damn good. In the room, like, we didn't really know what was going on. It was all just confusion. The Secret Service burst into the room. We didn't hear anything before. We couldn't hear the gunshots. So when they yelled down, everybody went under the table. And then all the cabinet members were whisked away. And then like, you know, Don Scavino was screaming USA, USA, and nobody was chanting along with him.

4:39But after that, it was just kind of confusion. Everyone's like, what happened? What are we doing here? And it took about 15, 20 minutes before they came out and said, you know, everything's under control. At that point, they said the dinner would go on. And we're like, no, it's not going on. But then somebody went on CNN and said the gunman was killed. And everyone's like, oh, it's definitely not going on now. but everybody was sort of calm about it at least in my area so and then we see the coverage and then you kind of get freaked out by the media coverage of it all i was like oh yeah that was kind of an effed up situation there well uh we are we are glad you are here in one piece speaking of stuff that happened this weekend why did you not see michael your your duty to this country is to see the michael jackson movie opening weekend is it why is that my duty i don't know because i i would have thought you would be curious you know what a lot of the the uh the music biopics are for me karaoke they're playing movies yeah i could see that but i don't know man 97 million 97 million domestic 217 worldwide big movie yeah there are artists or if the movie's good enough where i will immediately go to see it and look michael jackson is such a huge figure i think all the coverage of it has probably colored my opinion a little bit because i antoine fuqua actually tend to like his movies but this was a salvage job i mean i don't think any of the people involved in this movie will put this out as their best foot forward because they were put in such an awful position on having to not make the movie they wanted to make and make another movie on the fly my friends who saw it over the weekend or at least i i played tennis with a friend yesterday and he's like i had a lot of fun i watched i watched it i enjoyed it it was a good time yeah the average person doesn't care about any of this stuff all the new accusers that came forward they they don't care i will say sad in some ways but but yeah they don't care it's only it's only the end of april but but but you're you're in a good spot right now for the box office draft well i was not going to bring it up but now you and i have had one movie mario a little soft michael a little a little big you know i know mario's gonna be fine mario's fine but it's gonna be it's gonna limp past a billion it's not gonna be like uh you know it's not gonna get close to the to the first one yeah now it's really serious because you've got devil wears prada and you also have mandalorian i have the two big movies of may and how those do will have a lot to say about the you know my fate this year all right enough about that our favorite topic peacock we're gonna talk about how do you think peacock ranks like if you had to rank how much we talk about different streaming services on this show like i imagine netflix is number one because it's the biggest and blah blah it's the biggest And you are, as I've noted many times, you are Netflix's favorite reporter.

7:24You do me no favors with that. But I feel like Peacock is number two. Probably. Maybe Disney. Why do you think that is? How much do we ever talk about Disney Plus? Not much, but we should talk about it more. But we talk about Peacock because it's in this no man's land. It is domestic only. It is perpetually like clawing to get into the big time. And we all thought that maybe this was the year they would get to profitability. They have a trifecta of sports last month that really everybody thought was going to be a huge boost. It was a huge boost in audience. They got to 3 % of all viewing, which is good.

8:11Then the earnings come out last week and Comcast lost another$432 million on this service. And they're saying that they expect to be close to profitability. But what does that even mean? They are approaching profitability, which is a very fancy way of saying we are still losing money. You know, it's tricky because they do now have the second best selection of sports of any streaming service, right? right? ESPN, Disney's always going to have the most just because of what they do. But football, basketball, Olympics, some of the, you know, some of the other sports that they have between golf, tennis, et cetera.

8:52But how much is exclusive? Not much. Well, also how much really moves the needle? Football moves the needle. Basketball, I think Jerry's still out, right? I will say, you know, I'm a big basketball fan, so I am watching during the playoffs. But I also have YouTube TV. And so I default to watching there instead of on Peacock. I know. I think a lot of people do. I think that that's the issue is that it's not enough exclusive on Peacock and it's not consistent enough year round exclusivity. So you can come in and out. I mean, you reported this past week in your newsletter that their churn rate is about 9%.

9:29Yeah. That's the thing that alarmed me. Like it started, I noticed it start to tick up end of last year. And when I reached out to some folks, they're like, Oh, that's like the normal cyclical blah, blah, blah, blah, blah. But it has been on a steady upward march. And for the first three months this year, I think it was 9 % every month, which is way of like industry average is like five. Netflix is down at two. So that means they're bringing people in. And then a large percentage of people are going right out the door. And what's interesting to me about the service is that it's not like Comcast has sort of written this off and is letting it atrophy or kind of stay the status quo.

10:06They're investing. All of these sports rights that they, you know, they went after the NBA. A portion of that is attributed to Peacock and their spend. They went after Taylor Sheridan. And although that deal won't kick in for almost three years, they now are bulking up with writers and directors around Taylor Sheridan. They just hired Jez Butterworth, which is who had Mobland on Paramount Plus and a bunch of other things. Yes, they're basically taking the Paramount Plus scripted department and moving it over to. Right, which is smart because they've had a change of ownership there. And David Ellison and Cindy Holland have not treated them or in their minds of the people over there have not treated them well.

10:45So they are going after them. They hired Chris McCarthy, who is at Paramount. They got David Glasser, who produces Yellowstone. All their shows. Yeah. And I mean, it's like they're putting the team back together. But the question is, is Peacock writing checks that its subscribers can't cash? The deals that they're doing with Jez Butterworth, Taylor Sheridan, like long term, it makes sense because the whole Paramount Plus strategy or a big part of it was we have the NFL. What are we what are we going to have to excite people who like the NFL in between games or when the season is not on? And Taylor Sheridan was really the answer to that, right?

11:22They appeals to a lot of the same audience, makes these big, buzzy, expensive shows that he can because he and the people around him sort of are a factory. They're just constantly churning him out. And so the churn goes down and the growth is strong and the buzz around it is good. But that's, you know, you're waiting a couple of years before you even get Taylor Sheridan there. And you're probably waiting another year or two before you get a show out of him. So I think the bigger question is, like, what are they going to put on now to keep those people engaged? That's the Jez Butterworth. But even he's going to get a show in two years?

11:56Maybe. Well, listen, all this stuff moves slowly, but they brought over Chris McCarthy, who was the architect of the Yellowstone franchise of vacation. I have heard that he is already muscling around there and will likely have a bigger purview there soon. You know, they have an executive, Perlina, who runs the studio there and she's doing shows. but I have heard that it's, you know, the impression from creators is that if it's not one of these new people involved in the shows, it's very difficult to get a green light there. They just sat on a Clueless reboot that they were going to do. They bought it in development last year with the OC producers on it, and it just sat there.

12:35And finally, they passed on it. But that's something that probably would have gone had they not brought in all these other people. And I think what Donna Langley is doing, Donna runs the content now for NBC Universal on film and TV. I think she's bulking up on this stuff because she knows if she doesn't do the entertainment content, all this money is going to go to sports. They're going to have to pay the NFL a bunch more. They've got they already paid the NBA a bunch more. And it's sort of this battle between the entertainment content people and the sports people to get those budgets to do the programming.

13:14And Donna's acting fast. Yeah. Well, I will say the television studio actually makes a bunch of really good shows. Just some of them are not for Peacock, right? They have hacks on HBO, which has been a big hit. And they do, I think most of the originals that people would consider successful for Peacock have been made by Universal TV. There just haven't been quite enough of them. And they go on NBC. Some of them. I don't think all her fault went on NBC. No, no. But all those sitcoms, like the Reba McIntyre sitcom and things like that, they go on NBC first. Look, Donna has now been in charge of sort of the TV studio and Peacock programming and all that for, what, a year or two now?

13:58It's almost two, I believe. Yeah. And she's clearly trying to kind of put in a strategy. The movie studio, that's kind of the interesting thing about NBCUniversal. Like, to me, the question of what they do about Peacock ends up tying into what do they want to do about their media business in general, right? Like what is Brian Roberts, the CEO, co-CEO of Comcast vision for the company? But he's clearly allowing Donna Langley to go after these big creators. I've heard there's others that are lining up that are going to be doing deals with NBC Universal. So they're not abandoning Peacock. They are investing in Peacock.

14:39Yeah. Well, look, Donna is the most respected, was, because she's not just the movie studio chief anymore was the most respected movie studio chief in town has now taken on kind of a larger role is clearly excellent with talent um and so they're yeah they're trying to make it work because the studios do the studio business they have is doing well the theme park business they have is doing well and the cable networks that were failing they have sort of spun off for the most part of this other entity version but why can't they make peacock work why is peacock still losing money why can they not grow subscribers enough to counter it's losing money you can't it's losing money because they're investing so much in it you can't knock them you can't say like you know you have to give them credit for making the investment to try to make it work it's just taken a long time look they were late they were basically the last media company to introduce a streaming service unless you're giving them credit for hulu because they were nbc was one of the companies that started Hulu.

15:42They were the kind of initially, I'd say the most conservative. They've kept it US only. They didn't invest in programming as quickly as their peers, partially because they're owned by Comcast and they didn't want to accelerate the decline of the bundle. And partially, maybe it's a conservative company. And so it meant that everybody else got more. And it was like a brand new name. So at least with HBO, you know what it is. And at heart, it's subscriber-based. So they're building from scratch. And I think they've been torn between different impulses, right? All of the unscripted programming from NBCUniversal, the Bravo and et cetera, is mostly sort of like wealthy female viewers.

16:21And then football and a lot of the sports tends to be more male, maybe not quite as wealthy. And so I think they've had to figure out, like, are we trying to reach everyone? And in which case we need a little bit of something for everyone, or are we just going to focus on some sort of lesser targeted audiences, which is really what Paramount Plus did to grow a subscriber base. Now, in terms of usage. But do you think they've decided that? I don't know that there is a clear brand identity of Peacock at this point. I don't think there is. One of the reasons I wrote what I wrote is because I spent two months talking to people up and down the chain at Comcast and NBCUniversal were basically like, yeah, we still haven't really figured out what Peacock is or supposed to be.

17:01And I was like, you're six or seven months, or excuse me, you're six plus years into this project and you're not sure what it is? I know. And$11 billion into it? I know. And I always hear that, like, talks are happening in Philadelphia and behind closed doors, there's lots going on and something's in the works. And, you know, I have never gotten a straight answer about what the plan is. Is it a joint venture with Amazon or some other company to take it global? Is it partnering with one of the suitors that's still available? If there are any suitors available, maybe we'll see a Paramount Plus HBO Peacock combination at some point.

17:41But we haven't gotten that answer. And it gets back to the question, are they writing checks that their subscriber base can't cash? Do you think it matters that there is not, I mean, they would push back on this, but there is effectively not someone in charge of NBC Universal. You mean no CEO? I know Mike Cavanaugh, who was a Comcast guy put in charge of NBC Universal. Last year, he was made co-CEO of Comcast, and they never replaced the head of NBC Universal. They say he's still in charge of NBC Universal because he was the president of Comcast before, too. It's just now he's got a more elevated title.

18:17And so they've got this sort of two-headed hydra of donna in la and matt strauss on the east coast and i know and you know what jeff shell's available you know he just got back he had that job before 60 million dollars last year i don't know that he needs to rush back into yet another job um nor would i don't think what they want him but no no i don't know i do think that the lack of leadership at that company says something about their intentions with it. I just don't know what that is, whether they say that it's going fine and they're happy with the leadership they have there, whether they are reluctant to anger either Donna Langley or Matt Strauss by putting one over the other, whether they are looking to sell the entire thing and they don't want to have a leader of a unit that is going to be sold.

19:07Like, what does that mean about their intentions? It gives them a lot of optionality. I think usually you don't fill a role or you put in sort of a temporary placeholder if you plan to make some larger change in the next few months, years, whatever. I mean, look, they did go after Warner Brothers Discovery. They couldn't offer as compelling a deal as Netflix or Paramount. They had those talks with Electronic Arts. They've clearly thought about other strategic options. And for now decided that they can stay the course and invest in what they have. The stock is down 11 % in the past year. It's down 40 % in five years.

19:48We're talking about the Comcast stock. Yes, although most of that has nothing to do with NBCUniversal. Because that's actually, the issue for Comcast has been that their main business, their connectivity business, has also disappointed investors. And it's led to their stock going down. If their stock were back where it was you know five years ago they could have made a more compelling offer for warner brothers yeah it just well if this weren't a controlled company brian roberts would probably be out at this point right oh i don't know about that he's done he's done such a good job for so long he 40 decline in five years if real shareholders okay but i guess my my counter to that would be like look at the disney stock price and tell disney's still flat well disney is flat over like the entirety of Iger's era it's up but you mean from the 2021 high for the last five years it's gotten crushed right so I think if you looked at Comcast over the super long term much as Bob Iger yes the end of his tenure wasn't great but he wasn't going to get in fact he got asked to come back because he'd been so good for so long I think similarly with Brian Roberts he built this thing from a relatively small company into the giant that it is today he's made a lot lot of smart decisions.

21:02Now, has he made all the right decisions over the last few years? Probably not, right? Sky ended up not being a particularly good purchase. And Peacock hasn't worked that well. But I think that they're probably pretty happy with getting what was it$32 billion for their stake in Hulu? Look, someone who's a, you know, longtime CEO who's done a lot right for shareholders are going to give him the benefit of the doubt. So I think even if it were a normal company, he'd be sitting just fine. They might accelerate the succession planning. Well, maybe that's what's going on with Kavanaugh here. Co-CEO.

21:35Brian's never had one of those before. Co-CEO, the epidemic. We saw it at Netflix. We have it at Netflix. Well, we saw it, you know, with Reed, and then Reed was gone. This episode is brought to you by CeraVe Hair Care. Scalp is skin. Healthy scalp, beautiful hair. Discover hair care reinvented with dermatologists from the number one dermatologist recommended skincare brand with gentle hydrating and oil control balancing shampoo and conditioner formulated without sulfates or fragrance CeraVe hair care is suitable for sensitive scalps and all hair types curl patterns and color treated hair visit CeraVe.com hair care to learn more available online and in store retailers nationwide spring is in the air which means now is the time to save during spring outdoor power deals at the home depot make cleanup easier when you go cordless with the Milwaukee M18 String Trimmer, designed to deliver more runtime, more speed, and maximum performance.

22:31Then grab a select Milwaukee fuel attachment, like the pole saw, edger, or brush cutter, included at no extra cost when you buy the Milwaukee M18 String Trimmer. Shop seven days of spring outdoor power deals at the Home Depot, now through April 29th. So, the sports spending. do we think that they are happy with this nba deal and with the mlb deal and with bulking up on all of these sports and the fact they're gonna have to pay more for sunday night football pretty soon or are we getting to the point where the strategy of more sports more sports more sports is coming back to haunt these companies that cannot then get to profitability in their streaming service i think they're happy they're they're waiting to see yeah my my take on that is you can't be a serious competitor in the streaming wars these days without sports and i think netflix is coming around to that fact i mean they are they are the one that may need it the least but they also now also want it and that's the advantage that peacock has is that nbc has relationships and they have the olympics and all of these different sports relationships that's the only way that they play in this game.

23:47So I think it's still smart for them to have bulked up and paid the extraordinary NBA price, even if it's causing them to extend the time horizon to profitability. I still think that's right. They're going to argue that this churn is a shorter term trend. Part of it is that they've also started to sell their service via third parties and that's increased churn and that the data service we're using is flawed because it you know you it's a it's a oh yada yada it's essentially an s but yeah if sports fans know long term okay over the next 10 years this is where i go for football this is where i go for basketball this is where i go for olympics maybe the churn settles back down in a couple years where instead of it being nine percent it's five percent which is more manageable um because you you're seeing other the other and bundling is also helping right the disney churn has gotten better over the last kind of year or two, I think because of the different bundles in particular, they're one with HBO Max, which maybe will go away in the Warner Mount era.

24:53But if Peacock can find ways, you know, if there was a, not that they would do it, but if there was a really good, like Netflix Peacock bundle or a Disney Peacock bundle, suddenly the churn goes down. They have sports. They're complimentary. It's just, why would Netflix do that? Because sports, if they If they just said, you want to watch the sports, you can do it via Peacock. And if they had a way for, if they sort of said you were going to watch it within the Netflix experience. But Netflix is pretty fully penetrated in the U.S. You know, I know. They don't need the help. Their churn is at 2%.

25:26It's the best. And at what point does Donna Langley have to kind of own the performance of Peacock? If it's been about two years since she's been in charge of content. I believe the content has gotten better. A lot of it is the reality stuff that is coming from the Bravo and other relationships. Their biggest hit is Traders. So yeah. And Love Island. And Love Island. So yeah, I just wonder at what point is, do we start talking about where are more hits on Peacock from Donna and her people? I mean, I think you got to give them at least a couple of years because it's been a couple of years and the shows that they're putting together are just starting to come out, right?

26:06It takes a while to develop and change the pipeline. Her biggest deal so far is the Taylor Sheridan deal. And that doesn't even start until 2028 unless something happens. I think she's going to start bringing in a lot of other creators. And the mandate is going to be to recreate the Paramount Plus environment. It just makes too much sense. So really, there's just going to be Chris McCarthy operating in the background. I think that this guy is a very savvy operator. he has consistently shown himself the ability to manage up and he's going to start taking stuff over and it's going to be the whatever, you know, Mobland universe or the Jez Butterworth show that becomes four shows.

26:48It'll be something like that. Yeah. We shall see. All right, Lucas, thank you. Thanks, man. We are back with the call sheet. Craig, have you ever been to the Radford studio lot in the Valley? No, I haven't. Is it near the Warner Brothers lot? Kind of. It's closer to Universal, but it's right off of Ventura. It's a nice facility. I used to go there all the time because Entertainment Tonight was there when CBS owned it. And they would tape in the early morning. And if I was going to be on Entertainment Tonight, I'd have to go there. I mean, tons of shows have filmed there. Everything from Seinfeld.

27:23I believe I Love Lucy did a little bit there. Like, big shows. Who is Radford? Oh, I don't know. probably whoever owned the original land. I have no idea, but it was owned by CBS for many years. And then it was taken over by private equity, Hackman Capital Partners. They paid almost$2 billion, 1.85 billion five years ago for this property. And then boom, the content recession happens. The private equity that had all bet on these studio facilities in LA got their shirts handed to them in part for people like Netflix, companies like Netflix taking their production elsewhere, Netflix driving the entire industry off a cliff, and then boom, they swoop in and they are now negotiating to acquire the lot for what the LA Times reported was either 330 million, 330 million to 400 million, somewhere in that range.

28:14Which is a tremendous discount. Oh my god, it's like the irony of the whole thing of Netflix enabling this exodus of production, going to New New Mexico, going to New Jersey, going overseas, and then coming in to buy. You watch. Netflix is going to save Hollywood. Yeah. Buy for pennies on the dollar, this production studio. It's kind of amazing. And my prediction today is I think that Netflix is going to move their official headquarters over to this lot. I mean, Ted Sarandos has wanted a studio lot for years. He wanted the Paramount lot and the Ellisons aren't going to sell him that. Because what do they have right now in LA in terms of production studios?

28:55Do they have anything? Well, they produce stuff all over in different places, but their headquarters, their headquarters is in, you know, you've been there. It's in this like office park in Hollywood. But they don't have a lot anywhere that they shoot on. If they need to shoot something in LA, do they have to rent that space out from somebody else? They do. Yes. Because I know that they're doing a New Mexico thing. They have, they're building something in New Jersey, but they don't have a dedicated shooting space in Los Angeles, right? They do not. I mean, they may have facilities under long-term leases, and they may own places here and there, but they do not own a big lot here.

29:30And I think this is the chance for them to do that, to have a lot, to have their executives there. I don't know that Ted is going to love driving to the Valley every day. I don't know that, you know, I think they're going to probably keep a lot of the space in Hollywood because I actually don't think they could move everyone over to the Radford lot. I think it's actually smaller than what they currently have in terms of office footprint, but it's got that shooting space. And I think that they are going to take advantage of that and use it as their L.A. hub. What is this signal to you? Why would they be doing this now if shooting in L.A.

30:01is so expensive? They see that the tide is turning on production incentives. Listen, if you're looking at all of these mayoral candidates in L.A., they're all talking about increasing incentives and cutting red tape. all the governor candidates are falling over themselves to pitch Hollywood. I think part of that is donations. They want Hollywood money to donate to their campaigns. But I think also there's a, there's a feeling that after the fires and the strikes and everything in the content recession, we always talk about that Hollywood is hurting. They need to bring this business back and it's finally become a political issue.