Decoder with Nilay Patel
00:55:29 · Nilay Patel
[00:55:29] S4: That YouTube deal looks like the rebundling you're talking about, right? Peacock will be available to YouTube Premium subscribers. I have YouTube TV. I imagine that will somehow connect to the dots. YouTube is fascinating because they have the user generated content platform, and then they have TV. Those things are starting to compete with each other. Right? I look at the viewership charts and classic YouTube, user generated YouTube skyrocketing, just eating up everyone's time all day long. Everyone has to be there. YouTube TV... I'm assuming the economics of YouTube TV look like cable for you. Mhmm. They have to be far more lucrative. When you go into a room with Neal Mohan and he... You can say, well, there's the platform that's very lucrative, and there's a platform I have to be on. How do you reconcile the economics of the two?
00:56:11 · Matt Strauss
[00:56:11] S5: From my point of view, it's not one or the other. It's both. And again, it comes back to what I said about they're not exactly the same audiences. Like there's some overlap, but somebody who's subscribing to YouTube TV is not necessarily the same person who is subscribing to YouTube Premium or or consuming content on YouTube main. And I agree with you that when you look at this through the lens of share of time, I mean, has done an unbelievable job creating a platform and a business model that is allowing them to continue to grow. And I don't see anything that would indicate that that's going to slow down. And so when you look at it from my point of view, so much of our content and IP lives on YouTube in some form, whether it's SNL or whether it's Love Island or whether it's clips from The Traitors or any of our NBC shows. But those viewers don't necessarily subscribe to Peacock. They don't necessarily watch NBC or Bravo. And so I think that was the opportunity. That was the unlock, which is how actually can we transform ourselves in a way to reimagine what it could look like to partner with YouTube. And I would say that one of the things when I was talking earlier about this great rebundling, which we talked about and somewhat predicted seven years ago, was that the one thing that held the bundle together in cable television, in my opinion, for many years was sports. And what you don't want to do is you don't want to do a bundle deal without getting the right underlying wholesale economics. Because what will happen is you can take a very high ARPU direct to consumer subscriber and end up cannibalizing them for a low wholesale bundled subscriber. And so what you're really looking for is incrementality. Is this going to drive incremental subscribers? And can I get the right wholesale economics where this is incremental also on the revenue side? I think what's interesting about YouTube is that I think it's a win win. It's a win win because there's multiple components to this deal. One aspect of it, there's going to be a bundle that we're going to launch next year with the ad supported tier of Peacock with a tier of YouTube Premium. And now you're going to get access to all of the benefits of YouTube Premium with the ad supported version of Peacock.
00:58:40 · Matt Strauss, Nilay Patel
We believe that these are mostly incremental subscribers, people who do not necessarily have Peacock today. And so it's going to grow Peacock while it's going to add more value to YouTube Premium. My prediction is if you and I have a conversation a year from now, that Peacock will be one of the top distributed streaming services in The United States. [00:59:03] S4: Do you care that you don't own your last mile customer that way? This was a big reason everyone went to streaming is they were selling their content to Netflix and they realized Netflix owned the customer And we all got to stand up our own streaming services because we want to own the customer and the cable bundle is falling apart. Do you care now that as you rebundle, YouTube will own the customer and
00:59:03 · Nilay Patel, Matt Strauss
[00:59:03] S4: Do you care that you don't own your last mile customer that way? This was a big reason everyone went to streaming is they were selling their content to Netflix and they realized Netflix owned the customer And we all got to stand up our own streaming services because we want to own the customer and the cable bundle is falling apart. Do you care now that as you rebundle, YouTube will own the customer and [00:59:23] S5: stuff like that? I think think that that when you say own the customer, really what you're talking about is how do I have the ability to personalize the experience in a way that I could superserve an individual both with content and with advertising. And that's ultimately going to create the monetization engine that we need. I think when I was describing the value of Peacock and the fact that 80% of our subs are on the ad platform, and we typically charge premium CPMs, is because we have this ability to super serve our fandoms and franchises, and we have the data to do it. I think that our relationship with YouTube that we announced this summer is going to allow us to have a much deeper integration with YouTube on the data side, as well as the integration with FreeWheel. And so we're at a point where we're almost indifferent again about where does somebody consume the content. [01:00:23] S4: FreeWheel, by the way, your programmatic advertising business.
01:00:23 · Nilay Patel, Matt Strauss
[01:00:23] S4: FreeWheel, by the way, your programmatic advertising business. [01:00:25] S5: Yes. And so that was a critical part to this unlock with YouTube because we can create a bundle which is going to drive incremental subscribers and value. To your point, YouTube TV is the fastest growing pay TV distributor. I think the pay TV ecosystem has been declining at like a 6% to 7% CAGR. YouTube TV over the past five years has grown at like a 26% to 27% CAGR. They've got over 10,000,000 subscribers and are likely going to be the number one pay TV distributor in the next couple of years. We extended our linear portfolio agreement with YouTube TV, which is going to provide us stability and growth on that part of our portfolio as well. And then what we were just describing around having a much deeper integration on the data, on the analytics, and on the targeting is going to allow us to monetize our inventory. And so it's all of these pieces where we think this is an example of how we're trying to think differently, how we're trying to be innovative, identify strategic partners. I don't know if the red company or the blue company would be in a position to do the kind of deal that I'm describing. But I think it's precisely because we are independent and looking to be more flexible. I think that that actually becomes a calling card for how we could work with other companies in a way that is really transformative.
01:01:49 · Nilay Patel, Matt Strauss
[01:01:49] S4: Let me ask you, I think the red company got, hypothetically got, turned upside down because they relied on data too much for their programming. And now they're gonna change a bunch of programming executives, and we'll see where they go. Blue company, hypothetical Blue company led by the hypo... Hypothetical son of a billionaire is out in the market. They've made a big content acquisition. And he's saying, oh, we're gonna invest in technology, and we'll compete with Northern California, and we'll compete with any of the platforms based on our technology bet. That to me seems like an old story and like a story where I know the ending, which is trying to run at TikTok's technology without the content is just gonna get you backwards. How would you... If you were running the blue company, how would you think about technology in that way? [01:02:33] S5: Well, let me... I'm gonna answer the question based on how I'm running our company. [01:02:39] S4: No, no, why not? The blue company's new. Anything can happen with the blue company.