Why Broadcast, Not Cable Is The Peacock's Golden Feather
In a bold sign of the times, Comcast has officially announced its plans to spin off most of its cable assets into a standalone company. While many of these channels still spit out a decent chunk of free cash flow, the reality is that the rapid decline of pay-TV has become an untenable albatross on the share price of most legacy media companies. As such, others may eventually follow suit (though Comcast is better positioned for this move than many of its rivals). But what has been overlooked in the streaming era is the immense value linear TV programming still generates for D2C entertainment.
Six of the eight major SVOD services derive the majority of US audience demand from programming that originated on broadcast and cable, according to Parrot Analytics. NBCU is no different as an analysis of catalog demand share by release type underscores why NBC and Bravo, which will remain under the NBCUniversal umbrella, are so valuable. Both significantly over perform in terms of audience demand versus supply, solidifying their importance to the parent company. Keeping these networks in-house allows the company to more easily reroute the linear programming to Peacock, while licensing costs for the spun-off cable networks are expected to increase. This move allows NBCU to leverage its premium linear strengths while offloading under performers that could weigh down its share price as the pay-TV market continues to shrink.
Broadcast series, mainly from NBC, accounted for 12.9% of the supply for series available on Peacock in Q3 2024, and 36.1% of the demand. This means demand for broadcast series over-performed supply by a margin of 2.8x. Meanwhile, cable accounted for 34.1% of the series available on Peacock and 38.7% of the audience demand. While this is still a positive ROI, it represents an over-performance of just 1.1x. Separating out Bravo further demonstrates its value to the future of NBCU. The reality powerhouse accounted for 5.7% of supply share, and 9.8% of demand share, an over- performance of 1.72x. Peacock originals were underwater when comparing demand to supply, with a ratio of 0.88x. Similar trends arise for other streamers as well. But Netflix, which releases the greatest volume of originals, and Apple TV+, which doesn’t boast a back catalog of licensed content, unsurprisingly command the largest shares for originals.
NBCU’s decision to focus on monetizing the broad reach of broadcast — especially sports rights — while cutting its cable losses is one that will be closely watched and possibly followed by WBD, Paramount, and Disney in 2025. However, the elongated road between linear and streaming may create engagement unforeseen SVOD engagement challenges. The gamble is that the short-term pain of losing all that remaining revenue will be off-set by longer-term confidence from Wall Street as resources are redirected to growth initiatives such as broadband, theme parks and streaming.
