NBCUniversal’s Peacock stops offering free tier for new subscribers

NBCUniversal’s Peacock is no longer offering a free version of the streaming service to new subscribers, in a move that at least one analyst believes comes at an inopportune time.

The news was first reported and confirmed by The Streamable, which also noticed the sign-up option for a free AVOD plan was no longer available on Peacock’s website.

The change went into effect Monday and doesn’t impact existing users that are subscribed to the unpaid version of Peacock, who will still have access to the service for free, an NBCU person familiar with the matter told Fierce Video.

Peacock offers two other tiers, its Premium plan, which costs $4.99 per month, and its Premium Plus ad-free version that’s $9.99 per month.

The decision to drop a free version for new users is part of Peacock’s growth strategy, where it’s shifting stronger focus to its premium offering, the person familiar with the matter said.  While new users will have to pay for Peacock, the person said NBCU has no plans to phase out a free tier altogether.

According to the Streamable, the free version of Peacock is also still offered to current subscribers who cancel or those that were getting a premium tier for free, such as Cox internet users that no longer have complimentary access.

As for its increased focus on Premium, Peacock sees it as more reflective of the brand and user experience it brings to subscribers. By shifting focus to its paid plan, Peacock feels it will be able to create the best experience for a majority of viewers, remain competitive in the marketplace and deliver unique content across all genres, the person familiar with the matter said.

The amount of content on Peacock continues to grow in 2023 ultimately to nearly 100,000 hours, according to the NBCU person, including live sports such as the Women’s World Cup and Big 10 football, originals, pay 1 movies from Universal Pictures, news and NBC and Bravo next-day content.

The change comes just after NBCU parent Comcast reported fourth quarter earnings, which included heathy subscriber momentum at Peacock. The service now has over 20 million paid subscribers, an increase from the 15 million it had at the end of Q3. Comcast reported an Adjusted EBITDA loss of $978 million for Peacock in Q4 alongside $660 million of revenue. Peacock recorded losses of $2.5 billion for the full year alongside investment in the streaming service.  With investment in Peacock, Comcast President Mike Cavanagh said the company expects losses to peak around $3 billion in 2023 and steadily improve from there.

Alongside subscriber growth the streaming service nabbed a distinction in December, when usage of the platform climbed enough to capture 1% of total TV viewing in the U.S. that month – nudging it past the threshold to break out of the “other streaming” category in Nielsen’s The Gauge snapshot.

An ill-timed move?

The move to stop offering a free tier is interesting particularly as others in the SVOD space have or are considering introducing ads and free services alongside their premium streaming plans. Peacock had already entered the market in 2022 with a tiered model of a trio of plans including a free version, and paid plans with either ad-supported or ad-free options.

Paramount Global for example already has paid ad-free and ad-supported tiers of Paramount+, but also offers its free ad-supported streaming TV (FAST) service Pluto TV. Warner Bros. Discovery has said it’s mulling launching a FAST though is first focused on its combined HBO Max and Discovery+ service, which is debuting this spring and is expected to have options for commercial free and ad-lite tiers. Disney+ and Netflix have both expanded their SVOD offerings to include ads (though still paid versions). And most recently on Netflix’s earnings call, executives said the streaming giant has a lot on its place this year with its newly launched Basic with Ads plan and rolling out paid sharing, but is keeping an eye on all models and options, including FAST.  

And others are eyeing the FAST space at a time when the format continues to gain popularity and is poised for growth. A recent report from TVREV projects FASTs share of TV ad spend will surpass that of broadcast, cable or SVOD by 2025 to reach around $33.7 billion, and grow further to account for a whopping 42% share by 2027.

Peacock is also favored among the various FAST platforms available, ranking third in a TiVo Q2 2022 survey for most popular free services – behind only The Roku Channel and Fox’s Tubi.

In Tuesday analysis, NScreen Media founder and chief analyst Colin Dixon suggested the move to stop offering free version at this point in time doesn’t make sense considering growth in the FAST market and Peacock’s popularity with an opportunity to lead.

“The decision to back away from the FAST market now seems illogical and ill-timed,” wrote Dixon.

He noted that as recently as last week during earnings NBCU CEO Jeff Shell was touting a freemium approach and Peacock’s business model. Dixon also pointed out that Peacock launched late to the game relative to other direct-to-consumer streaming services (such as Paramount+ precursor CBS All Access which launched in 2014).

“With so much ground to make up, offering a free tier with a low 5-minute per hour ad load seemed like a stroke of genius. And the approach worked beautifully,” wrote Dixon.

The analyst cited Comcast’s Q3 report of 30 million monthly users accessing Peacock for free, adding that the service launched at the right moment to ride FAST momentum in the U.S. – a market that’s growing faster than SVOD. Citing an S&P Market Intelligence forecast, Dixon highlighted that U.S. FAST revenue is expected to grow at a CAGR of 23% to more than double to $9 billion in 2026.

“Peacock is already a major force in the FAST market. S&P estimates it is growing its share of FAST revenue faster than any of its peers, from 7% in 2020 to 16% in 2022,” commented Dixon. “Why back away now from a large, rapidly expanding opportunity in which you are killing it?”