NBC’s plans are contingent on striking deals with the largest pay-TV providers, which it hasn’t yet done, the person said. Still, the product will be free for customers of those providers, so NBC doesn’t plan on any challenges when it comes to inking those agreements.
Because the service will be free for the millions of people that already subscribe to pay-TV, NBC is banking on quickly growing to 30 million or 40 million users with its service, as opposed to slowly growing a paid service and starting at zero subscribers, the person said.
NBC will air between three and five minutes of ads per hour of programming, NBCUniversal CEO Steve Burke told CNBC. NBC expects to make $5 per month from every user on the service from advertising, he said. NBC’s research showed subscribers prefer free services with low ad load, Burke said.
“One of the interesting things about this that makes it different and innovative is that we’ll have a big emphasis on free-to-consumer,” Burke said. “We want to create a platform that has significant scale and can scale quickly. The best way to do that, is make it free to consumers and leverage the fact that NBCUniversal’s sister company is a cable company and now owns Sky.”
The company sees an opening because there is no long-form, ad-supported streaming service, the person said. For example, Hulu costs $7.99, but has regular ad breaks. Netflix has long-form content, but costs a monthly fee. And YouTube is primarily short-form, user-generated content and supported by ads. NBCUniversal does not plan on aggressively pulling back shows and movies it has licensed to other streaming services, the person said.
Burke told CNBC the service will include live TV like news and sports, in addition to on-demand programming. Since it will launch in early 2020, it’s likely there will be content around the 2020 Summer Olympics to draw more people to the platform. Burke also said the service will bring in content from other companies like Sony, Discovery and Warner Bros.
NBCUniversal will be throwing its hat into an expensive and competitive ring. Streaming incumbents Netflix, HBO and Hulu are upping content spend and doubling down on original programming to stave off market share threats from new entrants like Apple, AT&T and Disney, which are set to launch its streaming service later this year.
Also Monday, NBCUniversal announced a reorganization of senior leadership. Mark Lazarus, currently chairman of NBC broadcasting and sports, will take on a larger role and oversee the company’s cable and news divisions as well. Jeff Shell, currently chairman of Universal Filmed Entertainment Group, has been named chairman of NBCUniversal film and entertainment. Donna Langley will take over as the sole chairman of Universal Filmed Entertainment Group.
Disclosure: NBCUniversal is the parent company of CNBC.