NBCU reveals trojan horse OTT masterplan

NBCUniversal will launch a new video streaming service in early 2020, employing a freemium model comprising a free, ad-supported tier alongside an ad-free, subscription-based tier – available not just to its own pay TV subscribers but to rivals like AT&T and Dish Network. In terms of last gasp attempts to stem the flow of cord cutting, this isn’t a bad idea, yet launching a free OTT video service and excluding the Netflix faithful in the process is merely a temporary solution to a deep-seated problem.

The launch of the as-yet-unnamed offering will certainly give the US market a shake up, but its arrival in major international markets, namely the UK through Sky, will be of serious concern for local players, while also providing a valuable new platform for advertisers.

The technology clout alone of Comcast and Sky combined should, in theory, spin up a solid user experience, aiming to rapidly build up a user base of around 30 million to 40 million through a peculiar strategy, akin to a trojan horse.

Imagine being a fly on the wall of the boardrooms of every US pay TV operator this week, with execs debating fervently whether their subscribers tuning into an NBCU streaming service via their own products would bring pros or cons. Of course, rival operators will have to agree to a deal and many may abstain for fear of introducing long-standing subs to video streaming.

“Our new service will be different than those presently in the market and it will be built on the company’s strengths,” states the announcement. From what we can gather, as well as using its competitors as distribution channels, another differentiating factor will be its unorthodox approach to advertising. While Hulu’s free tier shows frequent ads, NBCU’s new offering will air only between 3 and 5 minutes of ads for every hour of content streamed. It was imperative that whatever service a Comcast company launched next, it had to avoid similarities with Hulu while also competing with Netflix and protecting the cable TV business. Not an easy feat but somehow NBCU has pulled something unique out of the bag; not that uniqueness guarantees success.

When you consider ad-supported streaming platforms like YouTube often show a 30-second ad for a clip of the same length, it puts into perspective how NBCU’s new tactic has the potential to disrupt the advertising market.

The ad-free subscription tier will reportedly cost around $12 a month, a source told CNBC, and will include 1,500 hours of TV series and a few hundred hours of movies.

NBCU mentions personalized ads as being a key feature for the launch. We know Comcast’s advertising technology portfolio employs This Technology which it acquired back in 2015, and it has also contracted Black Arrow (now Cadent Technology) in the past for ad tech requirements. Meanwhile, Sky’s programmatic advertising system SkySmart, built around Cisco technologies, has risen in popularity to the extent it inked a deal with rival UK operator Virgin Media in June 2017 for programmatic advertising – linking Liberty Global’s ad system with Sky’s Adsmart to allow programmatic deals to be offered across both in one pass.

Interestingly, only a few weeks back Comcast said NBCU was planning to fully incorporate some new technology into its addressable offering sometime this year, called Blockgraph. The idea is to create a secure path for data and information sharing, but Blockgraph is built specifically for the TV industry, described by Comcast Cable Advertising as designed to become the “identity layer”. This essentially means TV and media companies have greater control of data at scale and this therefore improves the efficiency and effectiveness of data-driven TV advertising and marketing – in turn leading to better targeting, execution and measurements across screens.

Blockgraph therefore looks set to be another differentiating element. Apple and Disney will be observing closely.

NBCU is notably not one to shy away from experiments in digital entertainment. It recently launched WatchBack, an OTT video app which rewards viewers with gift vouchers and other incentives to continue streaming content, introducing cord nevers to some of the company’s most popular cable TV shows.

In the past we have highlighted how NBCU and Comcast can’t seem to agree on an effective streaming strategy or each feel they need separate and different streaming strategies. Last year, Stephen Burke, CEO of Comcast’s NBCUniversal content division, told shareholders that he doesn’t think the streaming TV business is any good, but that was before the purchase of Sky – the pay TV operator which famously plans to set a bold trend by trading its satellite roots for an online ecosystem.

NBCUniversal has streaming deals with all the major internet TV providers, including DirecTV Now, Sling TV, YouTube TV, PlayStation Vue, FuboTV and Hulu. Burke noted while these deals are “very favorable” to NBCU in terms of licensing revenue, those deals have only contributed “marginally” to the company’s revenues.

NBCU CEO Steve Burke said, “People are watching premium content more than ever, but they want more flexibility and value. NBCUniversal is perfectly positioned to offer a variety of choices, due to our deep relationships with advertisers and distribution partners, as well as our data-targeting capabilities. Advertising continues to be a major part of the entertainment ecosystem and we believe that a streaming service, with limited and personalized ads, will provide a great consumer experience.”