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Peacock Won't Be Comcast's Only Ad-Supported Streaming Service

By James Brumley - Feb 25, 2020 at 6:22PM

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The entertainment giant just announced the acquisition of Xumo, bringing another free, commercial-driven video business in house.

Cable and entertainment company Comcast (CMCSA 2.05%) is still set to launch a new streaming video service called Peacock later this year, with a free, ad-supported version planned. It won't be the only free on-demand video play the organization will have in place at the time of Peacock's launch, however.

The company announced on Tuesday it has acquired an existing service call Xumo, which already offers free live and on-demand television programming supported by advertisements.

Black and white photograph of cheesy television ad

Image Source: Getty Images.

Ad-supported video on demand, or AVOD, has quickly become a battleground in the streaming arena. Unlike on-demand video services like Netflix or Disney+ from Walt Disney that are commercial free, a growing number of video venues are relying on ad sales rather than subscription fees to drive revenue.

A change of tides

The shift in focus comes at a time when consumers are beginning to feel "subscription fatigue" related to the number and cost of streaming video options. A recent YouGov survey indicated most U.S. consumers weren't willing to pay more than $40 per month for all their streaming subscriptions combined, with the 37% suggesting they weren't willing to pay more than $20 per month.

That limits most of them to between two and three services at a time, and as such, limits the potential of new subscription-based services. Streaming options that are free like Xumo and at least one tier of Peacock's pricing plan, however, don't face that limitation.

Digital TV Research reports that the ad-supported video on demand market in the United States is now worth on the order of $8 billion, but could swell to more than $20 billion by 2024. Now Comcast, which owns NBCUniversal, will enjoy two vehicles that address this market.

James Brumley has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix and Walt Disney. The Motley Fool recommends Comcast and recommends the following options: long January 2021 $60 calls on Walt Disney and short April 2020 $135 calls on Walt Disney. The Motley Fool has a disclosure policy.

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