NBCUniversal parent Comcast (NASDAQ: CMCSA) looks like it may soon be giving its young streaming service a much-needed boost. According to reports from Bloomberg, the company is considering adding new feature films to Peacock's lineup rather than licensing them to rival platforms like Netflix (NASDAQ: NFLX) or AT&T's (NYSE: T) HBO Max. Such a move would bolster the appeal of Peacock, which currently lacks the new, splashy content needed to draw a major crowd.
Neither NBCUniversal nor Comcast have confirmed such discussions are taking place, but given the relatively anemic start Peacock has mustered while competing services continue to load up their streaming brands with premium content, the rumors hold water. More important to investors, though, is that the strategy would support the sort of growth the company needs from Peacock.
Image source: Getty Images.
Not all the same
If the news rings a bell, it may be because I argued back in February that this was a move Comcast needed to make. Simply put, consumers aren't fans of outright buying digital copies of a first-run film, but they don't mind paying recurring monthly fees for at-home access to a large library of video entertainment. The catch? That content has to be the good stuff. Programming also available via conventional cable or films that are more than a couple of years old (and available elsewhere) isn't going to cut it.
And we've seen this premise bear out in the data. AT&T prompted several million activations for HBO Max by adding Wonder Woman 1984 to its offerings back in December, even though it was also in theaters at the same time. Walt Disney (NYSE: DIS) scored big when Soul, originally intended for theatrical release, was added to the Disney+ library in December rather than first being routed through a movie theater industry still crimped by the COVID-19 pandemic. Disney+ now has more than 100 million people on board.
Of course, Disney's flagship streaming service also offers access to mega-hit franchises like Avengers and Star Wars, while HBO Max can leverage its branded content such as Game of Thrones as well as Warner Brothers properties like Batman.
That's not to suggest Peacock's content lineup is poor. The Fast & Furious franchise is part of the Universal family, and original, exclusive programs like the rebooted Saved by the Bell have their appeal. But the service lacks a "wow" factor that Netflix and HBO Max bring to the table.
This may be changing soon.
Room for improvement
Investors should always take comments from "people familiar with the matter" with a grain of salt. In this particular case, however, Bloomberg's reporting at least passes the test of being rational and reasonable.
Peacock has been a relative disappointment since its launch last July. As of the latest tally, it only had 35 million sign-ups, paling in comparison to headcounts for Disney+ and others, even though Disney+ only debuted a few months prior.
These viewers aren't exactly the ones advertisers want an ad-supported service like Peacock to attract, either. Ampere Analysis estimates HBO Max's core users are between the ages of 25 and 44, while Peacock's viewers are, on average, considerably older. That may be why Peacock's users are less likely to respond to advertisements that are ultimately subsidizing Peacock's programming too. A Harris poll commissioned by Roku last year found that while around two-thirds of millennials have paused a streaming program to take a closer look at an advertised product, the overall average number of people who are stream-pausers is 43%. Peacock's average older user appears far less likely to respond to an ad.
In a similar vein, Ampere's comparison found significant income differences between consumers paying for HBO's best content and consumers viewing Peacock's limited on-demand library for free. Nearly 70% of HBO Max subscribers earn more than $51,000 per year, versus a more modest 54% for Peacock users.
The right move to make
It's impossible to attribute Peacock's relatively tepid start solely to a lack of newer, theatrically-released films. Comcast is still leading the way up a learning curve nobody else has dared to forge as boldly. That is, Peacock is the first studio and network-created platform to offer a completely free, 100% ad-supported tier. It made sense not to bet the proverbial farm on it just yet by committing new movies that could be better monetized through movie theaters.
We're closer to the end of that learning curve than the beginning of it, though, and given the early success we've seen from HBO Max and Disney+ via the use of their very best content, a couple of realities are becoming clear. Chief among them is that if you want to compete in the streaming arena, you have to provide consumers with at least some top-caliber film and TV show titles.
Comcast shareholders should hope that in Peacock's case, this becomes a reality.
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