NBC demanded that YouTube TV bundle Peacock or lose access to NBC channels

NBCUniversal recently asked YouTube TV to bundle Peacock, the NBC streaming service that has apparently failed to get many paying subscribers. The Comcast-owned NBC wants the Google-owned YouTube TV to pay for Peacock as a condition of continuing to have access to NBC channels after the companies' current contract expires.

Google objected to the demand, and NBC is apparently willing to drop it. But a dispute over how much Google must pay NBC is still pending, and both sides have warned that YouTube TV subscribers could lose access to NBC channels.

NBC's Peacock demand came during an ongoing carriage dispute between NBC and YouTube TV, according to a blog post yesterday by investor research firm LightShed Partners. The existing carriage contract between YouTube TV and NBC expires on Thursday, and about 15 NBCUniversal channels would be dropped from YouTube TV if the companies don't strike a new deal in time.

"NBCU is trying to force YouTube TV to bundle and pay for Peacock Premium as part of a new affiliation agreement for the NBCU channels," LightShed Partners wrote, pointing out that this is a strange demand.

"Your initial reaction should be why is Peacock even part of this discussion since it is an over-the-top, direct-to-consumer streaming service," LightShed Partners wrote. "You do not need YouTube TV nor any MVPD/vMVPD [Multichannel Video Programming Distributor] service to get Peacock—it is $5/month with ads and $10/month without ads via iOS/Android, tvOS, etc... The whole point of DTC streaming is you do NOT need the legacy multichannel bundle."

When contacted by Ars, a Google spokesperson confirmed that NBC asked YouTube TV to bundle Peacock and said that NBC's demand would force subscribers to pay twice for the same content. Google also told Ars that despite this proposed bundling arrangement costing users more, subscribers would have to download and use the Peacock app separately from YouTube TV. Given that, a Peacock subscription would simply be an extra perk of subscribing to YouTube TV without providing any special integration that makes the two services easier to use together.

An NBC source who is familiar with the negotiations told Ars that NBC's Peacock demand is "out" of the negotiations for now. But the source did not completely rule a Peacock/YouTube TV bundling out of a final agreement because negotiations are fluid and could change up until the final minute.

NBC clings to “legacy business model”

LightShed Partners analysts say they "sense the leading reason [for NBC's demand] is that Peacock has been underwhelming to date beyond usage on Comcast/Cox set-top boxes, where it effectively functions as an updated version of on-demand programming for cable subscribers... With NBCU struggling with marketing Peacock direct-to-consumer (evidenced by their talking about 'registrations' vs. 'paying subscribers'), they are falling back on their legacy business model of wholesale bundling to drive distribution. If they can force YouTube TV to carry Peacock, we suspect they will try to force other vMVPDs and MVPDs to do the same."

The dispute is a reminder that the bundling practices common to cable and satellite TV may not be eliminated by the rise of online streaming services. But in this case, LightShed Partners said it believes that NBC is fighting a losing battle and will ultimately drop its demand:

While carriage battles almost always end with the distributor caving, this just feels different. NBCU... want[s] to show investors that Peacock is a 'success' as streaming success is now the only thing that matters to media investors (thanks to Disney's incredible success launching Disney+) and sustain their increasingly challenged legacy broadcast/cable network assets. Yet, doing battle with a tech platform whose investors do not care about the broadcast/cable network business and who probably think of YouTube TV as a hobby with little-to-no profitability is going to be hard for Comcast/NBCU to win. Google clearly believes in the importance of YouTube TV to drive YouTube ad sales given its aggressive marketing spend. However, the leverage in this negotiation feels like it is skewed toward Google. Ultimately, we expect NBCU to cave and leave Peacock out of the agreement.

NBC may have dropped its Peacock demand after LightShed published its post, based on what the NBC source told Ars.

Though YouTube TV is delivered over the Internet, it is similar to traditional cable TV in that it offers a bundle of live channels, on-demand video, and DVR service. Google would obviously like YouTube TV to continue offering NBC channels without having to bundle Peacock, and that's probably a better outcome for users who could be forced to pay more for YouTube TV if NBC's bundling demand is successful.

Comcast CEO Brian Roberts said in July that Peacock has "54 million sign-ups and over 20 million monthly active accounts." That includes people who registered for the free tier, and it isn't clear how many people pay for the $5 and $10 tiers. As LightShed noted, the user number also includes people who get the ad-supported $5 tier of Peacock for free in a bundle with Comcast or Cox cable service. Comcast's latest quarterly earnings announcement said its media-division results include a "loss of $363 million related to Peacock."

Google to cut price by $10 if dispute continues

Google announced in a blog post on Tuesday that if the NBC deal expires without a new agreement being reached, it will decrease the YouTube TV monthly price from $65 to $55 until NBC channels are available again. Google pointed out that customers can sign up for Peacock separately "to continue watching NBCU content, such as Sunday Night Football."

NBC made a similar Peacock-bundling demand of Spectrum TV operator Charter earlier this year but "failed in trying to get Charter to carry Peacock Premium... and settled for a short-term trial for Charter subs," LightShed Partners wrote.

"We cannot fathom why YouTube TV would pay for Peacock, when they can simply tell subscribers to sign up for Peacock Premium via Google Play or any other app store," the investment research firm's blog post said. One of the strangest aspects of NBC's demand, LightShed wrote, "is that YouTube TV subscribers would not even be able to access Peacock from within the YouTube TV app; they would need to download Peacock and use the Peacock app. In addition, Peacock has a lot of next-day linear programming from NBCU that you already get when you subscribe to YouTube TV (or any other MVPD/vMVPD)."

Channels that could be dropped from YouTube TV if the dispute isn't settled include NBC, Bravo, CNBC, E!, Golf Channel, MSNBC, Oxygen, SYFY, Telemundo, The Olympic Channel, Universal Kids, Universo, and USA Network. Also at stake is access to NBC's regional sports networks in the Bay Area, Northern California, Boston, Chicago, Philadelphia, New York, the Northwest US, and Washington, DC.