They are hitting the market at a stomach-churningly weird time for the world and for the companies – and investors – that own them. As it turns out, though, quarantine has sent already robust television and streaming usage levels through the roof as we all look to our screens more than ever.
With big-bucks backing and quickly shifting marketing campaigns subject to fast-moving public health events, the respective offerings from Jeffrey Katzenberg, Comcast and AT&T have taken solace in the viewership surge. The big bet is, in these times of uncertainty, will they score or play a bad hand?
Quibi’s mobile-only service will appear April 6, offering a 90-day free trial followed by a price tag of $5 a month with ads and $8 for an ad-free version. Having lost the big platform of the now postponed Tokyo Olympics this summer, Comcast’s Peacock still debuts April 15 (for its own subscribers; July 15 for everyone else) with a price range from free to $10 a month. And, with the much hyped Friends reunion on hold like all productions, AT&T’s HBO Max arrives on a still-unspecified date in May, likely toward the latter part of the month, at $15 a month.
Like broadcast and cable networks and established streaming players like Netflix, the shutdown of production and the halt of live sports has created massive upheaval for the three new contenders. Quibi had to scrub its red-carpet launch party. Peacock and HBO Max would have seen heavy promotion at the NBCUniversal and WarnerMedia upfronts, which are no more. The postponement of the Summer Olympics to 2021 denies Peacock an unmatched launch pad for liftoff.
Despite that sentiment and all of the other headwinds, a number of industry experts still can’t imagine a more propitious moment to launch a new service.
“They are just in time. The more quickly they can get out the better,” said one longtime entertainment banker and analyst. “New York is on lockdown and it’s several weeks ahead of other parts of the U.S. People in some areas are still not taking it [the virus] as seriously as they should. Any new service could become attractive quickly. People are watching like seven hours of television a day and there’s a lot of demand for new original content.” He said that as these new platforms launch, original series will become scarcer on linear TV, Netflix and Amazon. Netflix can’t even depend on its ace in the hole — new international series — given the unprecedented global scope of this crisis.
The debut streamers will have at least some new shows to generate buzz and, in the case of Peacock and HBO Max lots of catalog and acquired content of all genres.
At Quibi, everything is new with all the major studios on board and big names like Jennifer Lopez, Reese Witherspoon, Game of Thrones alum Sophie Turner, Chance the Rapper and a revived Punk’d, Chrissy Teigen, Lena Waithe and Liam Hemsworth on the smartphone screen. The Katzenberg and Meg Whitman-headed venture boasts a slate of originals ready for launch next week, the first out the gate.
A venture riddled with risk in the best of times, the company’s core premise is delivering a largely millennial and Gen Z audience short-form video on the go (a theme that underlays much of the startup’s marketing blitz, including a Super Bowl ad in February) and it opted not to have a TV app at launch despite the fact YouTube is seeing its biggest growth in the living room. Even so, early buzz on Quibi originals has been solid and the oft-repeated maxim is “never bet against them” — meaning two major industry figures like ex-DreamWorks Animation kingpin Katzenberg and eBay boss Whitman.
Even though most of the service’s target audience is staying home, and 5G cell phone production has been delayed by the pandemic, many in Quibi’s target demo continue to watch their phones even without being able to roam.
“I think maybe this is a good thing for Quibi,” said Carter Pilcher, founder of UK-based subscription channel ShortsTV, a pioneer specializing in short films for mobile devices. “With coronavirus, it’s the best time ever to offer it [Quibi]. I think they have a lot of great content ideas and it will do fine, people will be excited, it will be free.”
“Quibi was already an experiment, now it’s an experiment of an experiment,” said Leichtman.
HBO Max, where some series were impacted by coronavirus-related shutdowns, will have at least a handful original series on tap for May, including shows that migrated from cable siblings TNT/TBS like Search Party and Raised By Wolves. It also has a vast library at its disposal, led by all seasons of Friends and The Big Bang Theory (though the hyped Friends reunion special might not film on time for launch over safety concerns).
Peacock’s launch slate is the most impacted by the ongoing coronavirus crisis. Besides the ambitious saga Brave New World, originally set up at USA, production on virtually all other original series from Peacock’s inaugural slate was paused by the pandemic. Coverage of the Tokyo Olympics was supposed to be a main driver of viewership and subscriptions for the new platform, including carrying live the Opening and Closing Ceremonies before they air on NBC in primetime and streaming three daily Olympic shows. That will no longer be on the menu after the 2020 Summer Olympics were pushed to 2021. Peacock will have to rely heavily on its library content, including The Office and the vast Dick Wolf series portfolio.
Several reports released over the past couple weeks indicate a big jump in consumption of TV content during quarantine. The question is, with three million jobs lost just last week, will streaming services become luxury goods in a recession, and will consumers, whose income has been hit or put at risk by the coronavirus pandemic be willing to add another monthly bill for a new SVOD service. Peacock and Quibi offer free AVOD options (the latter via its free trial and a distribution deal with T-Mobile). HBO Max won’t roll out its AVOD tier until 2021 and has not disclosed pricing.
The backers of the trio of services hope a surge in viewing will cure all ills as viewership spikes across platforms from linear TV to streaming. The studies have been rolling off the presses. On Thursday, a new one by Neilsen showed an 18% increased in total TV viewing (Live TV, timeshifting/VOD, DVD, game console usage as well as connected devices such as plugins like Chromecasts and Smart TVs) for the week of March 16-22 compared with the prior week.
A report the day before by research firm Samba TV showed total time spent watching Netflix and/or Amazon Prime on March 18 rose by 41% from the same day the week before. Subscription TV viewing more than doubled between March 17 and March 23 for six channels it measured – HBO, HBO2, Showtime, Showtime2, Starz and Starz Encore. Samba said audiences grew for older shows as well as new content.
WarnerMedia’s Entertainment and Direct to Consumer division the same day said usage levels since March 14 for HBO Now (the stand-alone service launched in 2015) were up over 40% from its four-week average. Daily binge watching of three or more episodes jumped as did movie viewing.
As streamers roll out their different price points go hand-in-hand with various goals. Peacock will be a free service but include a premium offer. It will the streaming home for some of NBCUniversal’s most iconic shows, allowing Comcast to boast a fair-sized streaming platform that can also promote its other assets, including driving broadband growth.
“Peacock is an add on service for Comcast customers to enhance the value of Comcast broadband, so it’s not a bad time to launch,” said Leichtman. “It was always designed as an added-value.”
For HBO Max, HBO’s 35 million subscribers are the low-hanging fruit. It will cost the same as HBO Now and will be free viewers who already subscribe to HBO on AT&T platforms. The company last month inked a deal with YouTube TV that includes HBO Max and working on agreement with other video providers. When they debuted their own streaming outlets last November, Disney and Apple secured distribution options that would give them a chance to “launch hot,” as former Disney chief Bob Iger put it. Disney bundled Disney+ with Hulu and ESPN+ and also offered Verizon customers a free year of Disney+. Apple leveraged its own device base, giving Apple TV+ free for a year to those who bought its gadgets.
At an investor event this year, AT&T executives acknowledged that HBO Max is at the upper scale of pricing but said packaging and deals inside and out of the AT&T fold could blunt the impact.
“There are ways to get this so it won’t cost the consumer anything. We’re trying to mitigate that price point as much as we can,” said a person familiar with the company’s strategy. AT&T hopes the service will lower churn – where people dip in, then out – which would save AT&T many millions. “They factor in value several ways,” the person said. As do others – Amazon, for instance, offers Prime Video for free to encourage shopping on the site. Apple uses AppleTV+ to support the Apple TV and products.
AT&T also counted on HBO Max to help drive upgrades to 5G phones in the second half although its not clear how many new devices will be available then due to manufacturing delays in China.
A core issue all three have to face is capital costs.
They will be putting billions of original content spending (and foregone licensing revenue) on their balance sheets at a time when other businesses across almost all sectors are severely challenged by the consequences of the on-going COVID-19 crisis. Financial liquidity and flexibility are in favor with Wall Street and ratings agencies versus debt and large, ongoing investments.
As markets roller coaster due to coronavirus fears and governments pump in trillions just to stabilize things, Wall Street analysts have pummeled AT&T in particular for its investments in HBO Max even as it tries to deleverage following its $85 million acquisition of Time Warner in 2017.
At Quibi, one streaming observer, noting its $1.5 billion content outlay, said, “Advertising sales won’t cover costs. They’ve got to grow paying subscribers at a very high rate and that’s a tough thing for anybody.”
Dominic Patten and Dade Hayes contributed to this story