AT&T (NYSE:T) and Comcast (NASDAQ:CMCSA) are about to launch their highly anticipated streaming services. Peacock, from Comcast, will make its soft launch next month, and AT&T's HBO Max will follow in May.
Social distancing practices have increased the amount of time consumers are streaming video, so it seems like lucky timing for both. But only HBO Max is set to actually benefit from increased streaming, as Peacock's appeal and business model is seeing substantial damage already.
Increased demand for streaming
There's no doubt consumers are streaming more video these days. Total streaming hours increased as much as 20% in the second week of March by some reports, and Nielsen suggests that number could climb as high as 60%.
WarnerMedia says HBO streaming has climbed faster than average. It saw a 40% increase in streaming hours compared to its four-week average in mid-March. The season premiere of Westworld was certainly a big draw to the service, but viewers' engagement with both new and old series increased across the board.
That bodes well for the launch of HBO Max. Viewers have a clear affinity for HBO's programming, and offering additional content should keep them engaged even more. AT&T expects all of HBO's current subscribers will be able to upgrade to HBO Max at no additional cost. In doing so, it should increase retention rates for subscribers and it might even be able to get distributors to pay more in their wholesale agreements.
No reason to sign up for Peacock until 2021
Comcast was planning to launch Peacock nationwide in July, just ahead of the Olympics. But social distancing practices have forced the International Olympic Committee to postpone the games until 2021.
The Olympics would have given NBCUniversal the big audience it needs to promote Peacock on its traditional television networks and would have given Peacock the content it needs to draw in an audience. In fact, 40% of consumers who've heard of Peacock said the service's coverage of Olympics was one of its most appealing features, according to a survey from YouGov.
The second-biggest reason was for classic shows like The Office and Parks and Recreation. But Michael Scott won't be streaming on Peacock until 2021, and Leslie Knope doesn't arrive until October. Even then, Parks and Rec won't be a Peacock exclusive.
Advertisers are pulling back on spending
Comcast's main source of revenue for Peacock is going to be advertising. While it requires a subscription, it plans to waive the $5-per-month fee for anyone with a pay-TV subscription. Viewers can pay an additional $5 per month to remove ads.
Now Peacock is launching into a challenging advertising environment. Advertisers are cutting spend across TV and digital -- nothing is safe. As consumers stay inside and shop only for essentials, advertisements for discretionary goods and services are unlikely to see a good return for marketers. Marketers are most likely to shift their ad budgets to proven and measurable platforms. A brand-new video service, even one from a big media company, is unlikely to top that list.
HBO Max, meanwhile, is a premium ad-free service. Management has plans to launch an ad-supported version of the service in 2021, but it'll be happy to delay that rollout if it's seeing good traction with the ad-free version.
While the official launches of each service are still several weeks away, they're both very likely to see the impact of social distancing on their sign-ups and engagement. It's good news for HBO Max, and terrible news for Peacock.