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What NBC's Peacock entrance means for streaming wars

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Ampere Analysis Research Director Guy Bisson joins Yahoo FInance’s Zack Guzman to discuss the latest streaming wars outlook as NBC’s Peacock service enters the crowded field.

Video Transcript

ZACK GUZMAN: But right now, I want to dig into the moves that we're seeing on the streaming front there as NBC kicks things off with its peacock platform there. An interesting shift in strategy to offer a free programming option there that will include ads. And for more on what that could mean to shake up the streaming space, joining us now is Guy Bisson, Ampere Analysis research director who joins the show once again. And guy, always good to see you. What's your take on how Peacock is offering something that other platforms really don't here when we think about Netflix and some of the other entrants here in Disney+ and Hulu? Is it enough to really separate Peacock from the pack?

GUY BISSON: Yeah, it's doing two things very different. As you say, it's a free service as well as a pay. In a way, it's a hybrid of hybrids. They've taken learnings from all of the launches that have gone before them and picked the best bits of the business model to try out a new strategy. So they have a free tier. They have a mid-level pay tier. And they have a premium tier with no advertising.

And what's interesting about that is that they're capping the ad load, even on the free to reduce it to just five minutes per hour. And that is a massive shakeup of the US network television model.

ZACK GUZMAN: Yeah, and when we talk about the platform there too, from what peacock has to offer, about 2/3 of its 20,000-hour catalog will be free for anyone here to stream in the US as long as they're, again, willing to put up with those ads. But when we look at how that might be different here in the pandemic economy versus what we saw back in February, what do you think becomes most important in weighing these? Is it price? Is it want content you can watch? What are consumers really weighing here as the end all be all?

GUY BISSON: So again, there's an interesting two sides of that coin. One thing about lockdown and the pandemic is with everyone at home, viewing of streaming services has gone up considerably. So that's a positive.

The negative, of course, is that advertising revenue has evaporated almost overnight, dropped massively across the globe, and has yet to recover. So they've got a challenge there in terms of making the money back on advertising but a positive to launch into a market which is still largely or to a large extent in lockdown, with lots of people wanting to consume streamed content.

ZACK GUZMAN: Yeah, I mean when we talk about that too, I mean, obviously you've gotta make up ground on that side. But when you think about the consumers making these decisions as well. And how, you know, a Netflix subscription could be an easy thing to count when you think about tightening your pocketbook, it was interesting because I did see a survey from Activate Consulting showing that prices become interestingly less important in terms of sign-ups. But it's become more important when we think about canceling some of these subscriptions. So how does that maybe position Peacock better than some of its competitors if it's going to be free if you're willing to put up for ads as we think about how long this recession might last?

GUY BISSON: I think it's a great position to be in to have that option. I think their middle tier that is pay at a lower price is probably the one that they're targeting as their main tier. But to have a free option is great at the moment. In terms of do you decide to drop Netflix, well, the US consumer, the US streaming household now takes almost four services. They are stacking to that rate already. Adding another and having the option to do that for nothing if you want to is very compelling.

The other thing to note about peacock is it's not just about NBC. They're also taking a strategy to behave a bit like a platform and bring on third party, non-NBC streaming services and channels as well and to offer access to their own and other linear channels. So it really will be that hybrid of hybrids.

ZACK GUZMAN: Yeah, and lastly, since you touched on our point of content and whether or not they're going to be willing to spend for non-NBC content, they're also still willing to spend for NBC content, as we saw on reportedly spending $500 million to win back the rights to "The Office." And we know how important that had been for Netflix in terms of some of the most watched content on that platform.

But obviously, if they're going to be dealing with a lot of the same issues that other platforms are dealing with in terms of soaring costs for content, how does that maybe, I guess, play into some sort of a death spiral when we think about everyone competing more now, more competitors competing for the same content? What could it do to the price?

GUY BISSON: Yeah, I mean, we've been in a boom or a bubble, whatever you want to call it, for content for a good five years. I think the difference with the studios, like NBC Universal is that they are in that business. They have always been in the content production business. And this is just an extension of it.

For Netflix, yes perhaps it's a different story. They certainly can't back away from their original strategy at the moment.

The other thing to note, of course, on the effects of coronavirus and lockdown is that production has halted around the world. So they've got a bit of a respite. Even the originals they were planning are on hold. So in terms of spend for the next few months, that's gonna be down. But yes, as soon as we're back to any sort of normality, they will be back in that fight, spending big on original content like everybody else.

ZACK GUZMAN: Yeah, as we highlighted last week on the last edition of Fame and Fortune, or I suppose it was couple of weeks ago, we heard from SAG AFTRA and the head of SAG AFTRA, saying that some of those racier scenes might have to be put on hold due to the pandemic. And if you don't have the racy scenes, who's going to watch content I, guess is really really the question we should be asking here. But Guy Bisson, appreciate you bringing us all that as Peacock gets out underway. Guy Bisson, Ampere Analysis research director, appreciate you taking the time.