Analyst sees the ‘Best of Times and the Worst of Times’ for Video Streaming Services

By: Anjali Sundaram | CNBC

As Americans are hunkered down at home and consuming more content, one analyst says the current situation “bodes really well” for NBCUniversal’s new video streaming service, Peacock.

“You see in the data traffic, the peak hours are still in the streaming times,” Craig Moffett of MoffettNathanson, told “Squawk Box” on Wednesday. “We’re all consuming a ton of entertainment, a ton of cable news.”

Peacock rolled out Wednesday for Comcast subscribers and then launches July 15 for everyone else. However, Peacock Chairman Matt Strauss said that moving up the launch date is under consideration. Comcast owns NBCUniversal.

In an increasingly saturated environment for streamers, Peacock has emphasized the unique aspects of its service, most notably that it has a free, ad-supported option. With the Olympics and new content creation postponed, Peacock is also relying on news content as well as its strong library, which will include “The Office” and “Law and Order.”

However, because of the reliance on advertising, Moffett said Peacock’s success will have to be measured differently than other services.

“It won’t be measured just by people trying it,” he said. “You have to stick to the engagement type of metrics, the time people are spending with the service, how much people are committed to being regular users.”

Many more people can be considered regular users as of now — Nielsen data shows streaming up 85% year over year in March; Disney+ recently reported it had reached 50 million global subscribers; and according to a Wall Street Journal-Harris poll, Americans spent an average of $37 on streaming services during the month of March. The question for Moffett remains whether these viewers keep streaming when circumstances change — and which services they ultimately choose.

“The hope is that Peacock will be one of those services that comes out the other side with a large group of customers,” Moffett said. “Eventually it will be much easier to sell advertising.”

However, he said that Peacock’s unique angle could actually be detrimental to its initial success during an economic downturn.

“Because Peacock is ad-supported, the real audience is advertisers,” he said. “It’s very good for the demand side, the consumer side, because there are lots of viewers. It will be a tough uphill climb trying to get advertisers.”

While many more Americans are spending time inside, due to state stay-at-home orders and unemployment, they may be more discriminating about their services.

Moffett said staying at home could actually be a double-edged sword for the media companies in the process of pivoting.

“You will see a prolonged period of unemployment. That means almost certainly that cord cutting will accelerate,” he said. “And streaming services will pick up a lot of users.”

For many companies diversifying into streaming, including ViacomCBSAT&T and even Disney, Moffett said this new frontier won’t necessarily offer protection against a cord cutting storm.

“For Comcast, can you replace with ad dollars, the damage done to the pay-TV ecosystem?” he said. “It’s going to be a tough challenge for players with legacy media businesses.”

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