🎯 Peacock’s all-in growth gamble

Betting on a user acquisition spike

February 21, 2024

Read time: 3 minutes 50 seconds

Just recorded my first ever podcast interview. Hoping it makes for a nostalgic rewatch in 2, 5, 10 years from now.

Had fun jamming out with Dylan Redekop from SparkLoop on a few strategy / newsletter / growth topics like:

• How Strategy Breakdowns grew to 35k readers in 7 months

• 3x mental models that helped me leave my job to go ‘all-in’

• Full breakdown of current and future revenue streams

Watch it on YouTube or listen on Apple Podcasts and Spotify. Enjoy.

— Tom

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Peacock’s all-in growth gamble

Chess Move

The what: A TLDR explanation of the strategy

For the past half-decade, video streaming providers have engaged in an arms race to secure the best content for their subscribers. Premium content is an essential investment because it: 

  • Attracts new subscribers to their platforms

  • Provides an appealing backdrop for potential advertisers

  • Justifies semi-regular price increases, driving up Customer Lifetime Value (CLV)

  • Reduces the risk of subscriber churn, which plagues even the strongest streamers 

Founded in 2020, NBC’s flagship streaming platform Peacock trails its contemporaries like Disney+ and Netflix in key metrics like total subscribers and subscription duration. 

They needed a catalyst for mass subscriber growth.

Cue in the National Football League. 

America’s obsession with the NFL is self-evident. 93 of the top 100 TV broadcasts in the United States in 2023 were NFL games.

Peacock has been on a sports shopping spree the past few years, acquiring rights to popular events such as the PGA Tour, WWE, and the Premier League. 

And they recently made their biggest purchase yet — an exclusive NFL playoff game for $110 million.

💡

Strategy Playbook: Partner with “sticky” brands on exclusive offerings that expose their customers to your products.

Breakdown

The how: The strategic playbook boiled down to 3x key takeaways

1.  Follow the Leader

As viewers continue to pivot from broadcast and cable to streaming, the NFL is actively seeking opportunities to meet consumers where they are.

Their groundbreaking $10 billion partnership with Amazon Prime Video launched in 2022, marking the first time that NFL games were available exclusively through a subscription video on-demand (SVOD) service. 

In a disruptive industry like SVOD, product launches are notoriously cumbersome and learning is very costly due to technical requirements and content fees.

Peacock piggy-backed on the pre-validated playbook established by Prime to expedite that process and reduce time spent experimenting.  

2. A CAC cheat code

With more consumer choice than ever, Customer Acquisition Cost (CAC) is the core focus for teams competing in the streaming wars. In the last 12 months, Peacock has spent more than $1.6 billion on marketing and promotion — yet their 30 million subscribers leave a lot of room to grow. 

Instead of launching a series of costly and time-intensive campaigns to attract new customers, Peacock found a moonshot opportunity to improve their CAC.

While critics scoffed at the lofty $110 million price tag, Peacock saw an opportunity to convert a fraction of the reported 23 million viewers of January’s Miami vs. Kansas City game to new Peacock subscribers.

It would have taken years of costly marketing campaigns, content acquisitions, and distribution partnerships to match the acquisition effects of a single NFL game. Plus, because of their consolidated investment, Peacock can now allocate those internal resources to other high-priority projects. 

Assuming a constant $5.99/month subscription fee for Peacock, and a 6% monthly subscriber churn rate, Peacock would break even if about 6% of the game’s audience were retained as new customers.

Peacock easily cleared that hurdle rate, with analysts reporting the game drew 2.8 million new subscribers. This means over 12% of the game’s viewers were new to Peacock. Peacock’s CAC for this group is below $40, over 40% less than Netflix’s benchmark.

They are also poised to return as much as $235 million in subscription revenue over the next 3 years from this cohort. 

Note: forecast presented in 2024 revenue, unadjusted for inflation, ignoring the present-value of money, and absent of any potential price increases that Peacock may introduce in the future.

3. Open up opportunities to increase customer lifetime value

Based on the assumptions made above, these new subscribers would have a CLV of around $84 dollars to Peacock. 

Many e-commerce and SaaS businesses use the CLV:CAC ratio to help evaluate marketing decisions, aiming to achieve a ratio of 3x or more. Using the analyst estimate of 2.8 million new subscribers from the game, Peacock’s CLV:CAC ratio would be about 2.1. 

But, subscriptions are not the only way that Peacock can drive revenue from this subscriber base. Other opportunities include: 

Rabbit Hole

The where: 3x high-signal resources to learn more

[5 minute read]

The NFL reigns supreme in the US, being some of the only content that can consistently attract massive live audiences. 

In addition to the 93 NFL broadcasts, College football claimed 3 of the top 100, and the Super Bowl “lead out” also grabbed a spot, meaning football-adjacent programing accounted for a massive 97/100 in 2023.

This is up from the NFL’s share of 72/100 in 2020. 

[12 minute read]

Technologies like SVOD, short-form video, and AI have entirely upended the advertising industry. A few areas that industry analysts are watching: 

• The pace which streaming ads will overtake traditional TV ads

• How companies manage their media dollars amidst economic uncertainty 

• How AI will impact the day-to-day approach for advertisers 

[20 minute listen]

Joe Pompliano from HuddleUp explores why the NFL was willing to move a game exclusively to a subscription-based streaming service, and why Peacock was willing to shell over 9-figures for this opportunity. 

Hint: It’s not just a loss leader. 

That’s all for today’s issue!

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Any feedback on today’s edition? Send us a reply!

Thanks for being here.

— Tom Alder and Alex McClelland

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