‘Safety net’: To prop up Peacock, NBC uses the power of its existing TV, ad sales business

Some agency executives consider Peacock a must-buy for two reasons: First, audience attention continues to shift from traditional TV to streaming services, and advertisers recognize a need to follow suit to retain their ability to reach people. If those ads can appear alongside TV-quality programming, then all the better. Second, they are already buying ads from NBCUniversal and trust it will ensure their ad dollars do not go to waste.

Yet even the agency executives reticent to consider Peacock a must-buy consider the second rationale cause enough for them to commit to spending millions of dollars on the service before it is rolled out nationally on July 15. “What they are relying on is their ability, as a portfolio media company, to have their own safety net,” said an ad agency executive who asked not to be named.

If Peacock fails to attract enough viewers to satisfy advertisers, then the ad dollars earmarked for the streaming service can be redirected to NBCUniversal’s TV networks or digital properties. “The good news is they’re going to have other media for me that I use,” said the unnamed agency executive. “There are not many media companies I can do that with.”

Furthermore, NBCUniversal appears to be intent on checking off the streaming wish lists of advertisers that are seeking to move more money into a market overrun with ad-free services like Netflix and Disney+. While Peacock will offer a $10-a-month ad-free tier, the service will primarily be advertising supported; it will have a $5-a-month ad-supported tier as well as a free tier with  only a limited selection of programming. Some people who subscribe to Comcast’s TV and internet services or Cox’s TV service will receive the paid ad-supported tier for free.

In addition to carrying TV shows, movies and TV-quality original programming, Peacock will carry fewer ads than traditional TV so its audiences will be more likely to sit through any interruptions. Plus, it will limit how often individual viewers are shown a given ad so those viewers won’t become as annoyed with the advertiser. Those ads will include formats allowing people to interact and purchase an advertised product or accept a discount offer. And importantly to ad buyers frustrated by a lack of transparency in the streaming ad market, NBCUniversal will tell advertisers which specific programming  carried their ads. “We’ll know exactly where our ads are being delivered, so that is a difference from others where you don’t know where your ads are running,” Sullivan said.

To be clear, NBCUniversal is hoping that it won’t need to use its TV networks or digital properties as a safety net. Peacock is supposed to be its safety net. NBCUniversal has projected that Peacock will have at least 30 million active accounts in the U.S. by the end of 2024 and generate $2.4 billion in revenue that year. Like every other TV company, NBCUniversal faces a market in which linear viewership is shrinking, so it must turn to streaming to grow. But managing that transition can be tricky, which is why NBCUniversal is not doing it alone.

NBCUniversal’s initial sales pitch for Peacock has concentrated on big-budget TV advertisers — its launch sponsors include Unilever, Target and Eli Lilly — that are sending more of their ad dollars to streaming. “It’s being incubated right now with NBCU’s largest advertisers and not open for sale to anyone else,” said a second unnamed agency executive.

Yet, for some advertisers, NBCUniversal’s asking price for Peacock seems too much to stomach. The company presented advertisers with packages that ranged from $15 million to $25 million commitments over the course of 18 months, Advertising Age reported in November. Since NBCUniversal positioned these as “share of voice” deals — offering to guarantee a percentage share of Peacock’s ad inventory for a period of time — advertisers had to fill out a lengthy document to effectively pitch NBCUniversal on why they should be part of the initial slate of sponsors. “A lot of clients just passed on it and said, ‘We’ll buy it when it becomes available at the right price and we can see how it launches.’ It just required a huge commitment,” said a third unnamed agency executive.

That said, the dollars that launch advertisers are committing to Peacock do not necessarily represent spending that would have otherwise gone to NBCUniversal. “It’s certainly not money that was earmarked for NBC,” said Sullivan, whose client State Farm is among Peacock’s launch sponsors. Another agency executive who has at least one deal in place with Peacock said the money is coming from the broader pool of funds that clients allocate for TV and streaming.

By prioritizing its existing advertisers, NBCUniversal has been able to ensure that it remains high on their priority lists as they move their dollars into streaming services — even as it also maintains a safety net if Peacock struggles to attract an audience. But the company is trying to avoid the latter scenario.

NBCUniversal plans to promote the hell out of its streaming service. The company is expected to spend upward of $300 million to market Peacock in its first year, according to The Wall Street Journal. Additionally, NBCUniversal has woven co-marketing arrangements into its sponsorship deals with launch advertisers. And it is timing the service’s national rollout to be within two weeks of the Summer Olympics, which will air on NBCUniversal’s TV networks and provide opportunities to prop up Peacock before a larger than usual audience. “They have a huge marketing machine,” said the first unnamed agency executive.

Assessing both that marketing machine and the safety net of NBCUniversal’s portfolio of TV networks and digital properties, ad buyers are bullish about Peacock’s potential. “We have all the confidence in the world that it will work,” Sullivan said.