Peacock's biggest risk is 'to get stuck in the middle' of the streaming wars: Analyst

Greg Portell, Global Consumer Industries Lead at Kearney joins Yahoo Finance's Brian Sozzi, Ines Ferre and Editor-at-Large Dan Roberts to discuss NBC's jump into the streaming wars through its new platform Peacock.

Video Transcript

BRIAN SOZZI: All right, we'll stay on the Peacock launch and streaming as well with Greg Portell, who heads up the consumer practice at the consulting firm Kearney. And our very own Editor-at-Large, Dan Roberts, is here as well.

Greg, I will start with you. I'm looking at these projections put forth by Comcast on Peacock. They're looking for 30 to 35 million users and about $2 and 1/2 billion in revenue by 2024. Do you think they hit that?

GREG PORTELL: Well, I mean, obviously they have that ambition. The risk for Peacock is that they get stuck in the middle. So they either need to continue to strive to get up to that $30, $40, $50 million subscriber level or change their strategy, become more of a niche player.

But the opportunity to compete is certainly there. The market is maturing at a point where they can actually start to define some strategies to hit those numbers.

DAN ROBERTS: Greg, Dan Roberts here. Two of the sort of prime shows that people link with NBC are not on Peacock yet. "The Office" will come in January. And then as understand it, "Friends" will not hit Peacock because that's on HBO Max instead.

And when we talk about the streaming services, we often talk about how many of them had one big, must-watch show that helped get subscribers. Hulu had "Handmaid's Tale." Amazon Prime has had a few, but "Marvelous Mrs. Maisel," "Transparent. Netflix has the kitchen sink approach.

I mean, what do you see right now as the shows or properties, maybe it's movies, things on Peacock that people will see as must-watch, must-access, and will pay for it?

GREG PORTELL: Well, I think a lot of that's been delayed by COVID. I mean, obviously they had ambitious content schedule that was going to try to create a lot of that must-see, unique, Peacock-only type of viewing. That's been delayed by the COVID impact.

I mean, what the conversation underscores for most is that this competition isn't just for consumer eyeballs. It's for creative talent as well and the content that they can-- they can create.

DAN ROBERTS: Yeah, you mentioned COVID affecting things. I mean, what a lot of people were excited about, obviously, because this is NBC, is having the Olympics on Peacock. And it seemed to me that the app was kind of staking its claim on having live Olympics coverage. Then, of course, the Olympics are now being pushed a year. Peacock will still have that when the Olympics happen in a year.

But do you think that sports is kind of the biggest aspect of kind of how the pandemic hurt Peacock's launch? I mean, some people thought that Peacock, once the Olympics got delayed a year, should have delayed its own launch.

GREG PORTELL: Well, I don't think you can delay the launch. I mean, obviously, the faster you can get into the space, the better. I think at this point the market is a mature marketplace. And waiting a year to come out would have been a bit of a disadvantage.

I mean, the upside of COVID for Peacock is that because that content and that sports is delayed, it does give them a little bit of a lower expectation coming out of the gate. So they can get some of their subscriber acquisition strategies, some of their pricing and bundling strategies, tried out and tested before they have to really make a splash with the Olympics.

BRIAN SOZZI: Greg, how many of these subscription services, streaming services do you think consumers will ultimately sign up for? The number continues to grow pretty rapidly.

GREG PORTELL: Well, and that's the real pivot. These are no longer media companies competing for distribution and content. They're brands that need to show consumers value.

And it's not just Peacock competing against Hulu or Disney+ or HBO Max. It's against all the other streaming services, whether it's Apple Music, Spotify, because the American consumer and the global consumer even more so can only spend so much of their budget on the type of subscription services that these companies offer. Our estimate is once you get to the $100 range, you start to lose the elasticity of the consumer base. So that's the point at which you're between 8 and 10 subscriber-- or 8 and 10 services at this point.

DAN ROBERTS: Yeah, Greg, it's interesting, as the number of subscriptions piles up for people and their plate gets fuller, you would think that they already are soon approaching the point where they'll be spending more than they were on cable. And so it sort of seems like what's the point? And yet I think my theory is people are happier to be spending, because they're no longer paying for something they didn't want, getting channels they didn't want. So even if it gets more expensive than their cable bill, they're happy.

All that being said, and we're talking about the things on Peacock, I'm not sure if we've asked you outright, do you think Peacock will succeed in the long run? Do you think it's going to be a big success, when so many of these subs are piling up and the money's adding up here?

GREG PORTELL: Well, there's two pieces to that. One, in the-- when you're competing and talking about the pricing compared to the cable package, we have to remember that those cable companies are now charging similar fees just for high-speed access that you then need to access the streaming services. So the competition for the consumer dollar is not only for content, but it's for access as well. You're in the same wallet, so to speak.

And then relative to NBC's ability to compete, they've shown to be very effective at building brands. Whether you talk about a "Law and Order" or a "Friends" or a Peacock, they have the talent to really make this work. And they're in it for the long game because of the financing backing that they have from Comcast. So it would be hard to bet against Peacock as a long-term player in this space.

BRIAN SOZZI: Greg, we've seen a tremendous run in shares of Netflix. I think part of that is reflective of this notion that Netflix could pretty much charge whatever it wants, especially as we're all quarantined at home still. How much pricing power do you think Netflix has?

GREG PORTELL: Well, as more entrants come in and the access to content becomes easier and more frictionless, so to speak, the pressure on Netflix to really manage their pricing is going to increase. I mean, this is a world of consumer choice. And as consumers flex the muscle they have, the ability of Netflix or any of the other providers to really start to hit pricing premiums and to man that pricing power is going to be limited.

That's going to be a short-lived solution for them. They're going to need to continue to go back to competing on value for the content and the user experience.

BRIAN SOZZI: Actually, Greg, do you think Netflix could charge an extra $5 and it won't be a problem?

GREG PORTELL: Well, I think that's a-- I'd have to check my own budget on that one. At some point, they are taking share away from other competitors. And that's very different than just taking an incremental $5.

So the question then becomes what are consumers being asked to give up in exchange for that Netflix experience? And to the point that was made earlier with the kitchen-sink approach, that's very different than building marquee content properties. And you start thinking about whether the $5 is worth it for the brand and the experience. They're going to have to have the value proposition to back that up if that's the path that we're going to go down.

BRIAN SOZZI: All right, well, it sounds like Netflix raises 20-- raises their prices by $20, they'll lose you as a customer, Greg Portell. Let's leave it there, though. Greg Portell heads up the consumer practice at the consulting firm Kearney. Good to see you.

GREG PORTELL: Thank you.

BRIAN SOZZI: And good to see you too as well, Dan Roberts.