Every Saturday, we post a "what if" column which examines an idea in the media industry that makes sense, even if it isn't likely to happen. This week's speculation involves speculating what the coming-sometime-in-the-future Comcast/NBCU streaming service might look like.
There aren't many businesses where being sixth or seventh to the market is a good idea. And that is certainly the case with mass-market television and movie streaming services. It's always a challenge to launch a new product, but when there are already established competitors who have grabbed an extensive subscription base, then your new product had better be affordable and has to also offer what those in the financial business sector refer to as "a great value proposition." In other words, your product has to be attractive enough for people to either subscribe to it on top of the existing competitive products or even better, drop that competitor to subscribe to yours.
Which is long way of building up to my point that while we don't have a lot of details about the upcoming streaming service from Comcast/NBCU, what we do know is just freaking insane. It is taking an idea that has had marginal success (TV Everywhere) and using that as the core of the new service. Comcast has apparently decided that the way to compete with Disney+, Apple & the new WarnerMedia streaming service is by reinventing streaming television's worst idea.
According to multiple published interviews with Comcast executives such as NBC Universal CEO Steve Burke, the upcoming Comcast service will have two tiers: a free version available to anyone with a cable or satellite television subscription (i.e. TV Everywhere) and a paid version. And here is how CNBC described the difference between the two versions:
The paid version of NBCUniversal’s streaming service will not let you watch live linear TV or same-season shows, according to people familiar with the matter. The free version of the service will require users to log in through their cable and satellite TV provider, but they’ll be able to stream live TV from NBCUniversal channels and watch current-season episodes of shows, the people said. In effect, only pay TV subscribers will be able to get the fully featured streaming service from NBCUniversal.
The paid service is expected to cost around $10 a month and yes, you read it correctly, will not include any same season episodes of TV shows. So basically, you'd be forking over $10 a month for non-current shows, along with whatever movies and older programs NBCU can pull out of their vault.
This is the dumbest digital idea I've heard from an established media company since News Corp. bought MySpace for $580 million, then just a few years later sold it off for $35 million.
First of all, this isn't a serious plan to launch a viable SVOD (subscription video on demand) or AVOD (advertising video on demand) service by Comcast. This is a cover-you-ass-we-need-to-have-a-streaming-service-but-we-are-afraid-of-ruining-our-cable-business idea. If you're a current paid television subscriber, you'll no doubt use the service. It will essentially combine all of your TV Everywhere apps from the various NBCU-owned networks into one place. And it's free.
But it's difficult for me to see the value for anyone else. At the Comcast Upfront event in May, Chairman of Advertising & Client Partnerships at NBCUniversal Linda Yaccarino promised that all of people's favorite shows like "The Office" would be "coming home" to the new streaming service and it would be "free."
"Next year we’re going to unveil the largest initiative in our company’s history: We’re going to have our own ad supported platform," she said. "While other companies are pushing advertisers out, we’re bringing them in. It will have a slate of originals and a gigantic library of all favorites. The shows that people love the most and stream the most are coming home at a price that every person can afford: free."
But it appears that "free" really means "free for paid television subscribers. Everyone else is going to be ponying up $10 or more a month.
And while it's not clear what content the service will have, there are a lot of tough decisions Comcast will have to make. Decisions that will be even more difficult now that Comcast has to service a nearly $115 billion debt load it incurred in part after recently purchasing Sky TV. That level of debt will affect every content decision and will ultimately lead to compromises in what can and will be available to subscribers.
Take, for instance, that decision to not include current seasons of shows from Comcast-owned networks on the new streaming service. Those current season rights are wrapped into the recent deal Comcast signed with Disney over its stake in Hulu. Comcast will sell its Hulu stake to Disney in five years and as part of the deal obtained a five-year agreement that ensures Hulu will pay an increased rate for the rights to stream NBCU programming. The terms apparently allow Comcast to stream catalog seasons of its programming, but Hulu retains the current season streaming rights. Comcast can pull all of its content off of Hulu in three years or in one year claw back the current season stacking rights. But given that Comcast is receiving more than $500 million a year from Hulu, how much of that revenue can Comcast afford to give up given its current debt load?
It's a similar situation when it comes to programs such as "The Office." Netflix has streaming rights to the popular comedy series until 2021 and given that Netflix was willing to pay a reported $100 million to keep streaming rights for "Friends" for a year, it's likely they would offer an equally lucrative deal for "The Office." Comcast executives have already speculated that the show may end up being shared by its new streaming service and a rival such as Netflix. But if that ends up being the case, they are not only giving up a reason for people to subscribe to their new service, they are walking away from a percentage of that $100 million plus potential payday. Exclusivity doesn't much matter if you're just trying to increase your content on your half-ass TV Everywhere alternative. But if that's all you're doing, then why even bother?
There are also reportedly some other content issues that will have to be worked out before the Comcast streaming service launches in mid-2020. Many of the most popular Universal TV titles are already streaming in multiple places and other are airing on diginets that apparently have extracted no-streaming clauses in their contracts. Other catalog titles that might be of interest to paying subscribers need to be prepared for streaming. Digitizing the prints, fixing audio levels and the other technical tweaks needed to bring a TV series online can easily run six figures. And that's not including music rights, which either have to be negotiated or the music has to be replaced. All of which means that many of the NBC Universal catalog TV shows that might be of interest to the super fan might be cost prohibitive to bring online.
It's a similar challenge with NBCU's massive film catalog. Many of the newer, more lucrative movies have already been made available to the established rival streaming services and getting those rights back will take time. And the cost of preparing older movies for streaming is also an issue.
Maybe the executives at Comcast have some wonderfully innovative plan for the streaming world that will astound everyone and create a new market for its content. But at this juncture, it looks like Comcast is building the type of streaming service you get when its designed by people in the business of protecting their current customer base instead of building a new, complementary business. It's the same business instincts that led Blockbuster to pass on the chance to buy Netflix for $50 million in 2000, because it didn't want to encourage a rival to its core video rental store business.