1. Peacock Gets Wings

NBC’s Peacock seems to really be hitting its stride. It was the second most popular streaming service in terms of sign-ups during Q4, jumping from 9% market penetration in Q3 to 12% in Q4 on the strength of shows like Halloween Kills, Yellowstone (they have the back catalog) and The Office, as per a recent Kantar report. 

It’s notable though that the majority of those sign-ups (56%) were people signing up for the free (FAST) version of Peacock, with 26% choosing the ad-supported subscription version (AVOD) and 15% choosing the ad-free (SVOD) version.

OTOH, the number of SVOD subs planning to cancel this quarter saw a significant drop, down to just 5.5% from 13.2% in Q3, so they must be doing something right.

And they’ve got the Olympics coming up. 

All of which may explain why Comcast CEO Brian Roberts just announced he was doubling the amount of money he’s spending on developing original programming for Peacock from $1.5 billion to $3 billion.

Why It Matters

Peacock provides a perfect case study of the Future According to TVREV. 

This is something we’ve been banging on about for a while, that the future of streaming is likely to be a three-tier system, where each service maintains a FAST, AVOD and SVOD version to create a funnel: bring them into the fold with the FAST and then work to upgrade them to an AVOD or SVOD subscription. 

The idea is that the various Flixes will use their FASTs to showcase prior seasons of series whose current seasons are available via their subscription services. At the same time, they will sync their FASTs with their current broadcast programming to avoid having two tiers of programming—one for linear and one for streaming. 

In addition to creating more loyal users and stronger brand identity, this strategy creates a solid base for advertising, with around two-thirds to three-quarters of viewers on one of the two ad-supported versions. 

There’s another huge advantage to this strategy too, one that is becoming more and more apparent: it sets the Flixes up very well for expansion into emerging markets where FAST services are going to be the overwhelming market leaders for the simple reason that they are free, and viewers in those markets cannot afford subscriptions.

We’ve written about Netflix’s struggles in India and how even when they’ve dropped the price to around four dollars US they still can’t get many subscribers because four dollars is a whole lot of money to most Indian viewers. Which means Africa, the rest of Asia and much of Latin America are not going to be any different.

In those markets, the various Flixes can establish both brand identity and market share by running popular U.S. and local series on their FASTs, and then expand their AVOD and SVOD audiences as those economies mature. In the interim, they will be able to collect ad revenue while growing a loyal audience, which seems to be a win all around.

What You Need To Do About It

If you are Peacock, you are on the right track, even though it may not seem so to some observers (or, quite likely, to your finance team.) Your FAST service is out ahead of its competitors (IMDbTV, Tubi, Roku Channel and Pluto)  in terms of new users, and a new study from Hub Research indicates that viewers aren’t all that bothered by having to watch TV commercials on streaming, provided the ads are relevant. So there’s all that and you’ve got the Olympics coming up.

If you are one of the other Flixes and you want to succeed on much of the rest of the planet, then you are going to want to emulate Peacock’s three tier system of FAST/AVOD/SVOD for all the reasons laid out above.

If you write about the industry, Peacock offers a perfect and simple example of what the various terms mean: FAST (Free Ad-Supported Streaming TV) a term yours truly came up with for a report we did back in March 2019 (something for my tombstone) refers to just that: free (e.g., no subscription needed) ad-supported streaming services. AVOD (ad-supported video-on-demand) refers to ad-supported services that charge a subscription fee and SVOD (subscription video-on-demand) refers to ad-free subscription services. 

If you are interested in how this all plays out, keep an eye out for our next TVREV report which will focus on the booming FAST market, how they are reshaping the advertising landscape, how they’re helping the smart TV OEMs to grow and why they are the future of TV in much of the world, including the U.S. where the number of households using a FAST service is now at 18%, up from 8% a year ago.

2. Google Finally Rolling Out A Budget Chromecast

Sleuths at several Google-focused websites have uncovered Google’s plans to roll out a budget-priced (<$40) version of its new Chromecast streaming device.

At first glance, this seems like a curious move given that the Death of Dongles has achieved meme status and the two companies whose dongles dominate the U.S. market, Roku and Amazon, have shifted their focus to smart TVs.

While it may indeed be a case of too little too late, it’s also possible that Google isn’t looking to the U.S. market for these devices, but rather to the rest of the world, where the market for both smart TVs and streaming devices is still wide open.

Why It Matters

In much of the developing world, the market for smart TVs is still relatively nascent and the market for TV sets in general is often dominated by small local manufacturers. That creates some blue sky for Google, who has been pushing its Android operating system to these same manufacturers as an easy way to create a high-quality smart TV.

Any smart TVs are going to be on the high end of the market though, and for consumers who purchase one of the lower-end local TVs, a low-priced Chromecast device may allow for the same functionality without the attendant high price.

Now whether these consumers will see the need (or have the budget) to pay an additional $30 or $40 for a streaming device is an open question, but it seems to be the best option for Google at this point.

It’s also possible that broadband providers or programmers may provide these devices for free or at a discount in return for some sort of advertising deal with Google.

Given that the device is still in the rumor stage, it’s hard to say, but most definitely worth noting that while the smart TV ecosystem is both solidifying and booming in the U.S., the market is still wide open elsewhere. Google, who has largely been shut out of the U.S. market, may find much greener pastures overseas.

What You Need To Do About It

If you are a TV manufacturer in an emerging market, remember that Google is not your only option. There’s Foxxum, a German company that makes smart TV operating systems, and LG Ads Solutions’ new River OS, among other options that don’t involve feeding your user’s viewing data into the Google machine.

If you’re Google, and you hadn’t yet thought about pushing the new Chromecast overseas, you’re welcome.

If you are Amazon, you probably shouldn’t be too worried. Your party trick of bringing the price of a Fire TV stick down to $15 or so during sales should work well as a defense against Google, whose stick will probably sell for twice as much. 

If you’re a U.S. consumer and very wedded to the Google ecosystem, this could be a great deal for you. Otherwise, there’s no reason to replace your current setup.