Decoder with Nilay Patel
00:33:54 · Matt Strauss
[00:33:54] S5: Well, I I think that, you know, if you look at our strategy, again, we're looking at this across our entire portfolio and our entire ecosystem. I think one of the benefits that we bring to the table with the leagues, as I mentioned, is we're not looking to just make the content available on streaming or on broadcast. It's both. And that allows us to grow reach, which is a good thing for the leagues. And I think that all that has to be taken into consideration when they're looking at how they want to go to market with their rights. For the NFL, we've got a very long history with the NFL. They're a strong partner of ours. Sunday night football has been number one on NBC for fifteen consecutive years. But we also entered into an eleven year arrangement with the NBA. As I mentioned, I think they've been very happy with the relationship. We've been happy with the first year of the NBA relationship because it grew audience for us. It allowed us to manage how we're thinking about having a weekly cadence of premium sports on Sundays with the NFL, NBA, and now MLB. It's allowed us to grow more advertising. And so when the flywheel works, it allows us to partner with the leagues in, I think, creative ways. And so everything has to be taken into evaluation when you're looking at this, whether it's sports or whether it's entertainment programming. But I think of it like a mutual fund. What's the content that's going to drive acquisition? What's the content that's going to drive engagement? What's the content that's going to drive frequency? Sometimes you have content and the answer to that question could change depending on where you are in the lifecycle of your business. And so you might have certain content that's a loss leader, but it's adding value elsewhere in the portfolio. And so that's generally how we're evaluating when we're going into a rights negotiation. I'll give you another example of this. And so when we were launching Peacock, we entered into a relationship with the WWE. And the WWE, we thought, would be a really great addition to Peacock for a few reasons. One was I wanted to have something that was on every month. And they've got their premium live events, which they do every month. And so that would create a cadence, which we thought was critical in streaming, which is how do you get somebody to open up your app?
00:36:18 · Matt Strauss, Nilay Patel
How do you build habituation? And so the WWE, we thought, could do that with premium live events. They also had a huge catalog of WWE programming, gave us more tonnage. And we also were able to look at the addressable market for the WWE, estimate what percent we thought we could penetrate, and then we know the CLV of a customer. And so that you can calculate what's the return on the investment when you're going to go after a certain rights package. [00:36:45] S4: So I'm sorry, what's the CLV for the listener? [00:36:48] S5: Like what's the lifetime value? What you're really looking at, what's the ARPU multiplied by the number of months that you retain a customer before they would churn? And so that's generally like the formula that you would look at. And so the reason I'm kind of laying it out this way is you're making decisions that are longer term. Like you're thinking about how does this fit into a broader portfolio view. And in the case of the WWE, it was actually, I think, a real win win. We acquired subscribers through the WWE. I think the WWE was happy with it because we were also able to bring in, new viewers to sample and experience the WWE. But then when that deal came up for renewal, the rates, the license fees went up pretty dramatically. And they ended up going to another streaming service. But we were actually Okay with that because what we had really focused on was how do we take those WWE viewers and habituate them. And what we found was WWE fans, they really like Fast and the Furious. They really like Yellowstone. They really like they like other stuff.
00:36:48 · Matt Strauss, Nilay Patel
[00:36:48] S5: Like what's the lifetime value? What you're really looking at, what's the ARPU multiplied by the number of months that you retain a customer before they would churn? And so that's generally like the formula that you would look at. And so the reason I'm kind of laying it out this way is you're making decisions that are longer term. Like you're thinking about how does this fit into a broader portfolio view. And in the case of the WWE, it was actually, I think, a real win win. We acquired subscribers through the WWE. I think the WWE was happy with it because we were also able to bring in, new viewers to sample and experience the WWE. But then when that deal came up for renewal, the rates, the license fees went up pretty dramatically. And they ended up going to another streaming service. But we were actually Okay with that because what we had really focused on was how do we take those WWE viewers and habituate them. And what we found was WWE fans, they really like Fast and the Furious. They really like Yellowstone. They really like they like other stuff. [00:38:01] S4: I'm sorry. Did you need to open the spreadsheet and figure that out? Or did you just interpret
00:38:01 · Nilay Patel, Matt Strauss
[00:38:01] S4: I'm sorry. Did you need to open the spreadsheet and figure that out? Or did you just interpret [00:38:05] S5: Well, that we have assumptions, but you know, you have to test you have to test these hypotheses. And so the elegance of this strategy for us was that what you're really calculating is that, Okay, well, if I don't renew this content, how many subscribers can I retain? And we were able to retain the majority of those subscribers and we ended up licensing a much smaller package of WWE programming. We were able to retain those subscribers because we had habituated them into other content. And then we took the money that we were utilizing to license the Premium Live Events and we reallocated it into other parts of the portfolio. And so that's the mindset in how we are approaching these deals. And if the economics make sense, they make sense. If the economics don't make sense, then we look to then how do we reallocate that investment into other parts of the portfolio where we try to find a comparable or better return. And so it's an evolving, like living, breathing strategy and approach in how we go to market when we're looking at any type of content, whether it's sports or entertainment.
00:39:17 · Nilay Patel
[00:39:17] S4: You've brought me to the other Decoder question. I think you've talked a lot about structure already. The other question I ask everybody is how they make decisions. You oversee a group called the decision sciences group. You are describing a lot of decisions that take time to pay off. Right? This is a strategy you set ages ago, the bet on live. You built a platform around it. You're seeing the flywheel spinning now. How do you make decisions? What's your framework and how does that decision sciences group play into it?
00:39:41 · Matt Strauss
[00:39:41] S5: Well, the decision sciences team, it's interesting. When I came to NBC, there was a research department and the research department did what I think a lot of media companies would focus on, which is they're looking at the ratings and they're looking at the demographics and more of a very traditional approach to how they're measuring performance. That to me is different than the muscle that I think we needed to build inside of NBCU, which is more, no, I need to better understand what drives acquisition, what drives engagement, what drives frequency, what drives retention, or what causes someone to churn, What's the propensity for somebody to upgrade? What's the propensity for someone to downgrade? These are very different skills. And so when I talked about early on having centers of excellence, At one point, there were two different groups, one doing research, one doing decision sciences. I would go into meetings, and they would have two different conclusions around how certain things were performing because they were evaluating them differently. And so one group might say, hey, this is doing really well because we grew the audience. And then the other group would say, no, it missed its mark on the paid subscriber additions, and it's not generating the right return. And so the solution was to bring them together as one team. And it's managed by, Will Gonzalez, who has done an unbelievable job in kind of now managing this as one holistic decision sciences and research team. I think when we were building Peacock, maybe we were at a grade school level of sophistication if I'm being a little cagey about it. I think we're now at a graduate school level. The sophistication of this team and their ability to predict forecast across multiple different KPIs is just unbelievable. And so when we sit in a green light meeting and Donna Langley really oversees all the green lighting for entertainment, But we partner together across all of these decisions. We are looking at multiple variables. Again, whether it's what do we think this is going to do from paid subs, from advertising, what's the brand benefit, what is the cohort for this content and other content that we think this cohort may watch on the platform? What do we think that this does to the frequency or the habituation? There's multiple KPIs that we're evaluating when we're greenlighting a show.