After Apple TV+ and Disney+ Launch, Comcast's Peacock Is Up Next

As the streaming market grows more crowded, Comcast's CFO suggested that the cable giant is considering a different strategy than Netflix and others.
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Come next year, consumers will have an embarrassment of choice in streaming services.

Joining Netflix (NFLX) - Get Report, Apple (AAPL) - Get Report, Disney (DIS) - Get Report, AT&T’s (T) - Get Report WarnerMedia and others, Comcast (CMCSA) - Get Report plans to roll out its own costly streaming endeavor, called Peacock, in April 2020. Shares of Comcast were down 2.19% to $42.93 on Tuesday.

Spinning up a streaming service doesn’t come cheap, and Comcast’s offering will likely be no different. On Monday, Comcast CFO Michael Cavanagh said that the cable giant, which owns NBC Universal, Xfinity, Universal Pictures, Telemundo and other holdings, plans to spend “probably about $2 billion in aggregate investment” over the next two years on content and marketing for Peacock.

Cavanaugh likened it to Comcast’s Xfinity Mobile wireless carrier service, in which Comcast invested roughly the same amount as it launched in 2017. Comcast expects that service to break even in 2021 -- and likewise, Peacock should break even in year five of its existence, he said.

“When you put that in context to the size of our company, and the evolution of TV markets, and the assets we have and the opportunity, we think it's a completely reasonable and logical and exciting investment for us to make,” he added.

Comcast has not gone into great detail about what content will be included in Peacock, at what price, or how many subscribers it’s aiming for, but plans to hold an investor day on Jan. 16 to presumably discuss some of those details.

However, he suggested that Peacock will take a different approach than the SVOD (subscription video on demand) formula pioneered by Netflix -- and replicated by others in the arena -- which involves bundling a combination of syndicated shows and premium original content and selling it for a monthly amount, ad-free.

Instead, he said Peacock may target what he called an underserved consumer demand for ad-supported premium content. As the streaming market grows more saturated, Cavanaugh made the case that many consumers would embrace an ad-supported option, and Comcast is reportedly considering offering multiple tiers -- potentially a limited free version with ads, an intermediate tier with more content including ads and a more expensive ad-free tier. Comcast cable and broadband subscribers will receive Peacock for free.

As the streaming market grows, many analysts agree that more ad-supported streaming options are likely on the way.

In a recent report, CFRA Research analyst Tuna N. Amobi noted that more than two-thirds (67%) of U.S. cord-cutters use both an AVOD (ad-based video on demand) and an SVOD option, with the differences in usage "partly attributable to demographic factors (including age, household income, etc.)"

To capture as many households as possible, we could also see intensifying price competition, Amobi wrote. Disney, for example, recently lowered the price of its ad-supported Hulu tier from $7.99 per month to $5.99 per month. 

For consumers, more choice and lower prices adds up to a new "golden age" of television. What that means for media and technology companies, we'll find out in the coming quarters.