• by Karlene Lukovitz  @KLmarketdaily, December 10, 2019

After months of little information about the Peacock streaming service set to launch next April, the CFO of Comcast yesterday provided a few key specifics, in advance of more to come at the company’s January 16 presentation to investors.

Michael Cavanagh, speaking at a UBS Investor Conference, revealed that the company plans to invest a total of about $2 billion in the platform in its first two years, or about 1% of total company revenue, and get it to break even by year five.

“I'd analogize it to Xfinity mobile… a couple of years back,” he noted. “We took about the same amount of investment, close to a percent of company revenue and incubated a product that’s now expected to be at break-even in 2021. That's the same mindset that we bring to the investment in Peacock.”

“And when you put that in context for the size of our company and the evolution of TV markets and the assets we have and the opportunity, we think it's completely reasonable and logical and exciting investment for us to make,” he added.

Cavanagh also revealed a bit more about Peacock’s pricing and business model, albeit without going the full Monty.

He confirmed that the model’s core will be ad-supported and free to consumers, but knocked down the recent rumors that it will be free to all consumers. (NBCU itself had previously indicated that it was considering making Peacock free to Comcast broadband and pay-TV customers.)

Comcast/NBCU sees the ad-supported model as an under-tapped opportunity. “We are not looking to play somebody else's hand,” he stressed.  

Instead, the plan is “to rely on advertising, ramp through distribution partnerships and reach, and [quality product]  being free to the customer,” he said. (“Customer” perhaps being an unconscious slip?)

But asked later whether it will be free to Comcast customers and/or price-tiered in some fashion, Cavanagh demurred, saying only that it will be “free in certain circumstances.”

“The net of it is, we think it’s an approach that will lead to lower aggregate investment to get to a place where you can achieve break-even [relatively faster than] the SVOD models we've seen thus far,” he said.

As for specifics on spending, Cavanagh said that the company will “get to a pretty high level of [the $2 billion] run rate in year one… and second year will be a touch higher.”

Not surprisingly, he confirmed that most of the spending will be on content, “meaningful marketing,” and initial infrastructure build.