Decoder with Nilay Patel
00:27:00 · S8, Nilay Patel, Matt Strauss
[00:27:00] S8: Hey, y'all. It's Esteb from America Actually at vox.com. We know that you have big questions about the world, and so do we. At Vox, we focus on covering the things that matter in your life and the things that make you curious, whether that's the big politics questions of the day, climate solutions that might actually work, or hopeful news in cancer or Alzheimer's research. We believe that journalism made for the everyday curious person can make a difference in making a better world. And if that sounds like something you wanna be a part of, Vox now has a brand new app, and it brings all of our journalism together in one place. Go to vox.com/app to download today. [00:27:49] S4: One one thing I always think about in terms of distribution is every distribution channel, the monetization is more or less lucrative. So I can make a million Instagram reels today, and they will make me $0, but more people will see my face and then maybe I will sell them a Verge subscription or the Decoder book or whatever it is in the future. And that's the creator economy. [00:28:08] S5: Mhmm.
00:28:08 · Matt Strauss, Nilay Patel
[00:28:08] S5: Mhmm. [00:28:09] S4: Right? It's a it's a 10,000,000 little ad agencies and Instagram doesn't pay for the content, and they all have to monetize it some other way. Then there's, I don't know, Peacock or Netflix where I pay a subscription fee and the content is there, and there's that monetization model. Then there's, I don't the movies. You can go and pay to watch one movie one time, and that's gonna be very lucrative for Christopher Nolan, maybe nobody else, but it's very lucrative for Christopher Nolan. Which one is most valuable for you? You're describing everything, but it has to be that some make more money than others and some attract more new audience than others and you're trying to bring people from the biggest audience to the most revenue. [00:28:45] S5: Yeah and so this is really I want to give a lot of credit to our ad sales team. Mark Marshall who oversees ad sales because several years ago we recognized that if you really want to have this kind of a strategy and vision, like I said about content first, platform second, you need to become almost agnostic around where the consumption is happening. And so we made the decision that we actually sell as one portfolio. And so when you're buying advertising, we are combining the audiences across broadcast, cable, streaming, digital. And that's how we sell it and go to market. And that's actually been the way that we've been doing this now.
00:28:45 · Matt Strauss, Nilay Patel
[00:28:45] S5: Yeah and so this is really I want to give a lot of credit to our ad sales team. Mark Marshall who oversees ad sales because several years ago we recognized that if you really want to have this kind of a strategy and vision, like I said about content first, platform second, you need to become almost agnostic around where the consumption is happening. And so we made the decision that we actually sell as one portfolio. And so when you're buying advertising, we are combining the audiences across broadcast, cable, streaming, digital. And that's how we sell it and go to market. And that's actually been the way that we've been doing this now. [00:29:29] S4: Is advertising the number one line of revenue here? Because on cable, when you were part of Comcast, I'm sure the rates were not as high as you we should get now that you're split. But Comcast just paid you carriage fees.
00:29:40 · Matt Strauss
[00:29:40] S5: Yeah, so we are a dual revenue stream business. Advertising is very much a material part of the overall revenue stream, not just of NBC and cable, of Peacock. And again, if you remember, this was a big part of our strategy when we launched Peacock six years ago because the streaming market specifically was very focused on ad free, binge viewing, scripted dramas, grow subscribers at any cost. That was the future. And we zigged while the rest of the market zagged. We believed the white space was actually going to look more like broadcast television. And so instead of trying to build a standalone streaming business, from the beginning, we always saw Peacock as an extension of the broadcast business. And if you look at it through that lens, that has influenced all of our programming decisions around live events and sports, around why we wanted to have movies and scripted but also unscripted and news because the belief was that streaming was going to look a lot more like television. And if the viewership moved to streaming, well then why wouldn't the advertisers move to streaming? And so 80% of the subscribers on Peacock are on our ad tier, which is a higher mix of advertising subs than I think almost any other streaming service. But that's because of decisions that we made six years ago. The platform that we built for Peacock was designed for live. And so when you see something like an exclusive NFL playoff game or the Olympics or the NBA tip-off, The reason why our platform scales and why you're probably not talking about pixelation or buffering or long latency or high app crashes is because we spent years doing nothing but just wanting to harden the platform because we believed that we needed to build a platform for scale for live. And so all of this kind of compounded itself to your question around whether you're watching something on NBC or Peacock, we sell it as one. And that has allowed us to go to market in a way that really does allow us to, I think, punch above our weight when it comes to the advertising and the monetization. And it's a critical part to our strategy. If you were to I think about 30% of our advertising revenue came from sports and streaming six years ago. Now it's probably closer to 60% of our of our advertising revenue is is coming from streaming and from and from sports.
00:32:17 · Matt Strauss
And so all of that gets aggregated as part of this broader portfolio approach.
00:32:22 · Nilay Patel
[00:32:22] S4: Yeah. I'm curious about the the sports piece of it, in particular the NFL. The NFL just keeps getting more expensive. That that... That's the business they're in. They're gonna keep charging you more money for rights. All the other sports, I think they would like to keep getting more expensive. They maybe don't have the leverage the NFL seems to have. That made sense in a world of carriage fees, right, where the NFL would say, we're gonna cost a lot of money. We're gonna go out to broadcast networks, and then the broadcast networks are gonna turn around their distributors and say, well, if you want the NFL games, you gotta pay what they cost plus our margin, And then my price all the way at the bottom at the consumer end would go up, my cable bill would go up. And I think everyone understands that that is the thing that happened for years and years and years. That is unbundled. Right? You are describing the unbundling of that entire business model, but the price of NFL rights, for example, keeps going up. And a lot of analysts I talk to are basically saying, look. At some point, Amazon and Apple are the only companies that are gonna have enough money to buy the NFL package. And an NBCU standing alone outside of the Comcast revenue that would would keep it afloat is gonna have to raise rates to some extraordinarily high level just to compete with the big tech giants that own their own streaming platforms and run them in a loss. That is very challenging mathematics. Right? If your business is based on live, you've got a stand up live events that people definitely wanna watch. Sports is at the top of that list. The sports leagues know that, and they're gonna keep coming at you with higher and higher demands. How do you manage that without making the price of Peacock skyrocket?