Full Transcript for Why Peacock is making a huge bet on YouTube

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Hello, and welcome to Decoder. I'm Nilay Patel, editor-in-chief of The Verge, and Decoder is my show about big ideas and other problems. Today, I'm talking to Matt Strauss, who is now chairman of the NBC Universal Media Group. Matt was first on the show about two years ago, and a lot has changed at NBCU since then, including his title. First, Comcast spun off most of the NBCU cable channels into something called Versant.

CNBC and MSNOW, plus some others. That's when Matt's role changed from heading up Peacock, plus some other streaming services, to heading up the whole thing, across all of NBCU's distribution, including broadcast and cable. Now, Comcast is in the process of spinning off NBCU entirely, which will be the first time NBC has been independent in essentially forever.

That's a lot to have going on all at once. And meanwhile, it's only just this year that Peacock became a profitable business at all. And it's still pretty far away from being anything like the juggernaut of Netflix. But if you've been paying attention to the entertainment industry recently, you'll know that Netflix is going through it. Its numbers are down and it's brought in new people to lead content, in order to try to recapture the audience.

You'll hear Matt say that he's always been betting on this moment, when streamers started to re-bundle into something that looked like cable, and audiences turned to live events like sports more often. You're gonna hear him talk about sports a lot, actually. Sports held up the cable industry for years, they held up broadcasts, and now they're the thing that can make streaming a winner for NBC.

This conversation was a fun one. I always enjoy talking to Matt, and he's clearly very confident about where NBCU is headed. Two things before we start. One, we used to always disclose that NBCU was an investor in the Verge's parent company, but that's no longer true. That stake now belongs to Versant. Two, you're going to hear me ask Matt about the Red Company and the Blue Company.

That's just my way of getting Matt to talk about Netflix and Skydance, the company that now owns Paramount and Warner Brothers. I think he did a good job playing along. Before we get going, do me a favor and subscribe to Decoder on YouTube, where we put out new episodes every Monday and Thursday. Okay, Matt Strauss, chairman of the NBCU Media Group.

Here we go. Matt Strauss, you are the chairman of the NBC Universal Media Group. Welcome back to Decoder. Thank you so much, Nilay. It's great to be back. I am very excited to talk to you. There's a lot going on in the media. It is a tumultuous time in Hollywood. I have to tell the audience, you and I are speaking like minutes after Anthropic filed its S1 and all of humanity is going to be turned into AI.

Who knows what entertainment we'll be watching in the future. There's a lot going on. Let's start at the very beginning of this. You have a new job since last time you were on the show. Last time you were on the show, you were the head of direct-to-consumer, which you were the head of Peacock, basically, and the other apps inside the family.

Now you're the chairman of NBC Universal Media Group. Yes. What's the new job? What does that mean? Well, so NBC Media Group is really, it's comprised of certain services within NBC. It's the Broadcast Network, it's Bravo, it's Peacock. It's NBC Sports. We also have NBC News and Telemundo. And I think one of the things that we recognized, especially when we spun off some of our cable assets last year into Versant, was that the assets that we had truly worked better together.

You know, NBC really has been like a megaphone. It's been incredibly strategic in how we've been able to grow Peacock, just given the reach of NBC, which is a bit ironic because I think so many people believe that broadcasting was a bit of a relic of the past in this digital world, but it's actually proven to be the opposite. That as things have gotten more fragmented, having a broadcast network is actually a superpower because we're continuing to see ratings growth.

And that has been really helpful as we've been building out Peacock. But Peacock actually also was finding new audiences, cord cutters or people who maybe didn't even grow up watching NBC or some of our cable networks. And so Peacock's also been really strategic in how we've been able to reach and drive people back to NBC and Bravo. And so that flywheel I think is where we recognize that we need to start operating differently.

And I've been a huge advocate of really what I like to call centers of excellence in how I like to structure the business, which is content first, platform second. How do we get maximum reach, maximum engagement? And that really required us thinking differently about how we were running the business.

You know, we essentially, instead of having a programming group within broadcast and a programming group within streaming, we just collapsed the business. And so now you've got one programming team, one marketing team, one product and technology team, one decision sciences and research team, one obviously one advertising team, and they're all incentivized around just how do we continue to grow the portfolio, again, get that maximum reach, maximum engagement, continue to drive top line revenue.

And I think that that structure has really, something that we put in place about 18 months ago, I think that is contributing to a lot of the success that we're seeing now. And so even if you look at 2026, NBC is the number one network in total viewers. We had an unbelievable early part of the year with Legendary February, which you might remember.

That's when we had the Super Bowl and the Milan Cortina Olympics and the NBA All-Star Game. In 17 days, we reached over 225 million viewers. This summer, we had Love Island, which was the number one show of the summer for streaming. You had the World Cup, which was the number one Spanish-language sporting event in U.S. history on Telemundo and Peacock.

We had a show called Five Star Weekend, which was our number one scripted drama. And now we led ourselves into the fall where we've had Sunday Night Football, which has been the number one show for 15 consecutive years. We had a great kickoff, over 25 million viewers. We just had the NBA tip off. last week with the Knicks and the Sixers, which is the number one rated tip off in NBA history.

And so it does feel like we're firing on all cylinders and how we're trying to really operate in this, again, in this kind of content first platform, second mantra. But what's also really important just to kind of go one level deeper is a big part of this strategy is how do we move audiences across platforms? And so, for example, when I mentioned that Love Island was the number one streaming show of the summer, 40% of those Love Island viewers also tuned in to watch the World Cup.

And so migrating viewers back and forth across the portfolio is a critical part to how we see ourselves continuing to grow. But to do that, to effectuate that, you need to structure yourself in a way where people are incentivized along that vision. And I think that we're still kind of evolving as an organization, but I'm really proud of some of the milestones and accomplishments that we've made as a team.

And I love my job. I feel like I've got the best job in the industry at the moment. Yeah, it is a tumultuous time in Hollywood, and you seem like one of the happiest people in the industry right at the second. That is very notable. You're a decoder pro. You brought up structure. I'm dying to ask you about the decision sciences group. That's the other question I ask everybody.

But let me just back out for one second. You're describing quite a lot of freedom in rethinking how something like NBC would work. And you mentioned the verse and spin. So that's CNBC and MSNOW and a bunch of channels went that way. I'm on their networks all the time. I would describe the folks at Versant as feeling more free, right? They're like, they're disconnected from the battleship that was Comcast and NBCU.

They can go try whatever they want to try. They're energized by it in some ways. Then Comcast looked at NBCU and said, okay, we're going to spin off NBCU as well. And we're going to be the cable business and NBCU will be an entertainment business. And now you're in charge of that. You're like a 20-year Comcast veteran. I think you got your start doing cable boxes.

Yep. I started in 2004 at Comcast. So just tell me about that process of, all right, we spun off NBCU. CNBC and MSNOW and Aversant. Now we're looking at this company. We ought to spin off NBCU as well. And just tell me about how that came about. What was that moment like? Did you all sit in a boardroom? Did it come down from on high? How did that happen? Well, that decision really was a decision that was made by Brian Roberts and Mike Kavanaugh.

And so, candidly, I was not in the room when that decision was made. But I think if you were to ask people at NBCUniversal, it makes strategic sense. Do you feel that same sense of freedom? You know what? I think that there's an energy about people when they show up here, they feel very passionate about what they do. They believe in our strategy.

They believe in our portfolio. When you look at NBCUniversal more broadly, like before I was describing the media group, but the media group is one piece of the broader company. You have Universal Film and Television, which has obviously been having an unbelievable summer with The Odyssey, with obsession. You've got Universal theme parks and experiences.

And we opened up Epic Universe last year. We announced we're going to open up a theme park in the UK. We have Sky, which was part of the company, but it was more squarely sat within Comcast cable. And now that's going to migrate over to the new NBC Universal as part of this restructure. And then you have these media assets, which I just spoke about earlier.

And so you've got this unbelievable portfolio. And I think that people here really believe in our growth and that if we're a separate company, it's going to allow us to move faster. It's going to have more clarity around where we want to make capital allocations and decisions. And there's a few areas that really play to our strengths as an organization.

One of them is about live sports, live events. I think that that's always been part of NBCUniversal that we're really known for. If you just look at the sports portfolio that we have, we've got NFL, NBA, MLB, Big Ten, Premier League. We've got the Olympics with the IOC. You've got this unbelievable portfolio. portfolio of sports content. And that's a strategic asset when we're partnering with the leagues because we believe in broadcast.

We believe in broad reach. We're not trying to put everything exclusively on a streaming platform. And we've demonstrated across almost every single sport that in 2026, we can actually continue to grow ratings, reach new audiences, which again, is something that's becoming more and more complicated. Can I ask about that? Because you also run Peacock, which is obviously a paid streamer, and you can access sports on Peacock.

When you say grow ratings on broadcast, are more people putting up antennas to watch sports over the air? No. What I mean, by the way, there are about 20% of TV households in this country do still use over-the-air antennas. We have lots of listeners who are going to tell you that's the best picture quality you can get. Yeah, and it is an amazing picture quality, especially if you live in the right look angle where you could pick up the signal.

What I mean is it comes back to what I said earlier about managing as a portfolio. And so we don't think of it as broadcast sitting next to a streaming business. We really position ourselves as we are a digital first company trying to get that maximum reach. And so when we look at the ratings, we're combining what you would think of as more of the traditional ratings for linear television with streaming and all of our digital platforms, whether that's a DVR, whether that's TV Everywhere, we aggregate it into one platform.

And so when you look at it through that lens, which is just audience, we've actually demonstrated that across almost every sport, NFL, NBA, MLB, the total viewers that we are reaching now in some cases are the highest they've been in decades. Even the Super Bowl, which we had earlier this year on NBC, which reached about 137 million viewers at its peak, and that's across, again, all of our platforms, that Super Bowl was the highest rated live event in NBC's 100-year anniversary, which is this year, which is, again, it's kind of counterintuitive, but what we're showing is that when we start operating as one, We can reach new audiences.

We can aggregate them. And we are demonstrating that not just across sports, even something like the Thanksgiving Day Parade, which has been an institution on NBC also for 99 years. This past Thanksgiving Day Parade was the highest rated parade we have had in the company's history. And so there's a renaissance happening around live. which in a world of instant gratification, on-demand, watch what you want when you want, the fact that you're now seeing this shift of more and more viewers wanting that collective consciousness of social viewing, things that still matter in today's society, that actually plays to our strengths.

And we're seeing that manifest itself in higher ratings. But it's also, as I mentioned, a big part of our strategy. It was a big part of Peacock's strategy, which was a bit of an anomaly when we launched Peacock six years ago. But it's also a huge foundation of what I think NBC does well, which is we create these big tentpole events and we're able to shine a light on them and get huge audiences that are continuing to show up, even in a world of fragmentation and cord cutting.

It's interesting that you've described it as content first, platform second, and then you're describing your approach to ratings as agnostic to distribution, right? You're just sort of combining everything and saying this is the number of people we reached. Yeah, well, take something like the Milan Cortina Olympics. And so this is an interesting example.

If you were to look at that Winter Olympics, we had 3,200 hours roughly of content. And there's no way we can make all of that available on one network. There's just no way to day part 3,200 hours. And so this is something that, similar to what we did in the Paris Olympics, if you remember, we made the decision to make every event available live.

Now, when you make it all available live, we put it all on Peacock. And this was a very controversial decision because the question has always historically been, if people tune in to watch this live during the day on Peacock, are they going to tune in to watch NBC primetime? And are we going to cannibalize our ratings or are we going to grow the ratings? And this is where we really tested this strategy, which is, well, if we're truly indifferent then what should happen is that we should be able to expand the funnel during the day, get more people into the Olympics, and really try to create an experience that we're very proud of.

We really do believe, whether it was the Gold Zone or whether it was Multiview, that we were able to surprise and delight viewers and make it really easy to navigate and find all of the choices on Peacock. But then what happened was that people were tuning in to watch NBC in prime time because there's a difference between what NBC does and what Peacock does.

NBC was more about storytelling. It was more about, well, let's talk about what happened today, but what about the backstory of the athletes? Or how's Mike Tirico going to kind of address his perspective on things? And when you back out and say, okay, well, when you combine these two things together of putting all the content on Peacock and then having the primetime show, you know, this winter Olympics, you know, was the, you know, it was about a 96% higher rating.

It was about like a 20, 25 million viewers were tuning in to watch the Olympics, Malang Quartin Olympics, which was about 96 to 97% higher than Beijing.

On the digital side, it was double the digital minutes of every other Winter Olympics combined. And we also doubled the advertising revenue. And so it's a little bit of you've got to be willing to break some glass. And it starts with and this is gonna seem so obvious, but it starts with the consumer. It starts with how do we approach the consumer and give them the best experience? And if you build it, they will come.

And the only reason I'm using the Olympics as an example is because if you were to look in the past, This was a real pain point where we didn't make everything available on streaming. Or it was confusing for some viewers to figure out how to navigate all of the choices. And we really, as an organization, decided to put our shoulder behind this.

And I think the results ultimately speak for themselves. But again, it ladders back up to this vision of really starting to manage as one portfolio. And if you can drive that maximum reach and engagement, that's also going to be where you're going to get the best monetization. The Verge team in particular was addicted to Gold Zone, which was the whip around coverage of every metal event.

It was very fun. Let me ask you about this. A big decoder trope is that your distribution fundamentally affects what you make, right? That the medium is essentially the message. And I know what a YouTuber makes because they're on YouTube. And I know what a TikToker makes because they're on TikTok. And I could stretch this all the way back to saying, I know what broadcast TV looks like because the medium of broadcast TV has fundamentally shaped the content that gets made there.

And I know what cable shows on Bravo look like. And they're not the same thing. And they haven't been for a while. You're describing, okay, we're going to bring programming in. We're going to centralize that. We're going to be agnostic to distribution or indifferent, I think is the word you used. And that's going to increase viewership. But the pressure of the different distributions is still there, right? Running the broadcast network over the air is still different and reaches different people than distributing on YouTube TV, than running Peacock as a paid platform unto itself.

How do you manage that tension, right? Because it is real. It is very real. It's a really insightful question. So the tension is real, but actually, I don't view it as tension. I actually view it as an opportunity. Because you've got different audiences in some cases, like if it's a Venn diagram, and you look at who's the audience on broadcast versus the audience on cable versus the audience on streaming, there's some overlap, but it's actually not as much as you would think.

And so that actually speaks to this broader strategy, which is, well, how do we reach, if we reach all these different viewers, but they're on different platforms, how do we start kind of bringing this together into one? Now there's multiple ways to effectuate that kind of a strategy. Like one is you start sharing content and window content differently across platforms.

So for example, we have a show on Peacock called The Paper, which is Greg Daniels created it, who also created The Office. And it's a really great comedy and it's an original. And if you were to look at how streaming services typically make originals available, they're exclusive. Like you premiere it on your platform, your streaming platform, and it stays on that platform forever.

typically. Well, what we're starting to experiment with is, well, what if we premiere the paper on Peacock, but then six months later, we then introduce it onto NBC? Now you're bringing a show that was created for streaming, you're making it available on NBC to a new audience, but then you also have this added message. which is if you wanna watch next week's episode now, go get Peacock.

And now all of a sudden NBC is not only reaching new audiences, but it's becoming a sales channel for how we can then drive people back and sign up for Peacock. Do you give that to Greg Daniels? This is the thing that I, the feedback loop of a YouTuber is so blunt. I've made like a handful of Instagram reels in my life and I literally open and look at the retention chart and think, Oh, I should put another hook in there in the middle to keep my viewers.

And it's like immediate. That's not even how my brain works. And it's immediate that the data makes you think this way. If you say to Greg Daniels, hey, make sure episode two of The Office ends on a cliffhanger so that I can advertise. You can go watch the next episode right away on Peacock. Yeah, so, well, Donna Langley, who oversees all of the entertainment programming, she would be the one calling Greg Daniels and giving him that feedback.

But here would be maybe a different way to answer that question. I don't think... that we're necessarily trying to change the framework of how some of the shows are being created on NBC or on Peacock because there's still something about premium content and how that's being created that I think resonates with a lot of people. But here's what we're thinking differently, which is, okay, take a show like SNL.

which we had the 50-year anniversary for SNL a couple of years ago, which is unbelievable what Lorne Michaels has created. You still have SNL that's on 11.30 p.m. Eastern time. But what if we now take that content and we format it for vertical video on Peacock? We know that there's a whole cohort of people because of TikTok or Reels that they're watching on their phone.

They're likely holding it vertically. They're likely using their forefinger or their thumb to navigate. You know, they're watching a show like SNL on YouTube in some cases as well. Well, instead of trying to recreate or tell viewers how to watch the content, why don't we just take that content and reformat it in a way that's more akin to them? And so now you can go to Peacock and you can watch content in a vertical video format.

That may not be for you, but it might be for somebody else where they want to swipe, you know, sketch to sketch to sketch because that's how they enjoy it. Or let me give you another example, which is sports. You know, I mentioned earlier how we try to introduce new features around sports because it's such a passionate fandom. And you can't change the way somebody watches an NBA game.

People want to watch an NBA game in the way that it's being produced. But the lines are getting blurred around what's a live event and what's a video game, especially if you grew up playing NBA 2K. And so we now introduce something called Performance View, which is on Peacock. So you can watch the NBA game Or you can enable performance view.

If you enable performance view, an overlay comes on top of the game. And now it looks like a video game where we're pulling in real-time sports data from sports radar. We're calculating the probability of somebody making a shot. We're using graphical overlays to show the trajectory of the ball. We're putting the names over the players' heads just so it's a little bit easier so you can kind of follow what's going on.

And you're not... changing the core production, you're enhancing it. The enhancement of it, whether it's something like performance view, whether it's something like I'm describing with SNL, whether it's, again, rethinking the windowing of the content, I think it's all of these types of tactics and features that are allowing us to kind of reach new viewers, but also allow them to consume the content on their terms.

And the way you watch may be different than the way I watch. And we're just trying to give viewers different choices to enhance their experience.

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One thing I always think about in terms of distribution is every distribution channel, the monetization is more or less lucrative. So I can make a million Instagram reels today and they will make me $0, but more people will see my face. And then maybe I will sell them a verge subscription or the decoder book or whatever it is in the future.

And that's the creator economy, right? It's a 10 million little ad agencies and Instagram doesn't pay for the content and they all have to monetize it some other way. Then there's Peacock or Netflix where I pay a subscription fee and the content is there and there's that monetization model. Then there's the movies. You can go and pay to watch one movie one time and that's going to be very lucrative for Christopher Nolan, maybe nobody else, but it's very lucrative for Christopher Nolan.

Which one is most valuable for you? You're describing everything, but it has to be that some make more money than others and some attract more new audience than others. And you're trying to bring people from the biggest audience to the most revenue. Yeah, and so this is really, I want to give a lot of credit to our ad sales team, Mark Marshall, who oversees ad sales, because several years ago, we recognized that if you really want to have this kind of a strategy and vision, like I said about content first, platform second, you need to become almost agnostic.

around where the consumption is happening. And so we made the decision that we actually sell as one portfolio. And so when you're buying advertising, we are combining the audiences across broadcast, cable, streaming, digital, and that's how we sell it and go to market. And that's actually been the way that we've been doing this now for several years.

Is advertising the number one line of revenue here? Because on cable... When you were part of Comcast, I'm sure the rates were not as high as you get now that you're split. But Comcast just paid you carriage fees. Yeah. So we are a dual revenue stream business. Advertising is very much a material part of the overall revenue stream, not just of NBC and cable, but of Peacock.

And again, if you remember, this was a big part of our strategy when we launched Peacock six years ago because... You know, the streaming market specifically was very focused on ad-free, binge viewing, scripted dramas, gross subscribers at any cost. You know, that was the future. And we zigged while the rest of the market zagged. We believed the white space was actually gonna look more like broadcast television.

And so instead of trying to build a standalone streaming business, from the beginning, we always saw Peacock as an extension of the broadcast business. And if you look at it through that lens, that has influenced all of our programming decisions around live events and sports, around why we wanted to have movies and scripted, but also unscripted and news, because the belief was that streaming was gonna look a lot more like television.

And if the viewership moved to streaming, well, then why wouldn't the advertisers move to streaming? And so 80% of the subscribers on Peacock are on our ad tier, which is a higher mix of advertising subs than I think almost any other streaming service. But that's because of decisions that we made six years ago. The platform that we built for Peacock was designed for live.

And so when you see something like an exclusive NFL playoff game or the Olympics or the NBA tip-off, the reason why our platform scales and why you're probably not talking about pixelation or buffering or long latency or high app crashes is because we spent years doing nothing but just wanting to harden the platform because we believed that we needed to build a platform for scale for live.

And so all of this kind of compounded itself to your question around whether you're watching something on NBC or Peacock, we sell it as one. And that has allowed us to go to market in a way that really does allow us to, I think, punch above our weight. when it comes to the advertising and the monetization. And it's a critical part to our strategy.

I think about 30% of our advertising revenue came from sports and streaming six years ago. Now it's probably closer to 60% of our advertising revenue is coming from streaming and from sports. And so all of that gets aggregated as part of this broader portfolio approach. Yeah, I'm curious about the sports piece of it, in particular the NFL.

The NFL just keeps getting more expensive. That's the business they're in. They're going to keep charging you more money for rights. All the other sports, I think they would like to keep getting more expensive. They maybe don't have the leverage the NFL seems to have. That made sense in a world of carriage fees, right? Where the NFL would say, we're going to cost a lot of money.

We're going to go out to broadcast networks. And then the broadcast networks are going to turn around their distributors and say, well, if you want the NFL games, you got to pay what they cost plus our margin. And then my price all the way at the bottom at the consumer end would go up. My cable bill would go up. And I think everyone understands that that is the thing that happened for years and years and years.

That is unbundled, right? You are describing the unbundling of that entire business model. But the price of NFL rights, for example, keeps going up. And a lot of analysts I talk to are basically saying, look, at some point, Amazon and Apple are the only companies that have enough money to buy the NFL package. And an NBCU standing alone outside of the Comcast revenue that would keep it afloat is going to have to raise rates to some extraordinarily high level just to compete with the big tech giants that own their streaming platforms and run them into loss.

That is very challenging mathematics, right? If your business is based on live, you've got to stand up live events that people definitely want to watch. Sports is at the top of that list. The sports leagues know that, and they're going to keep coming at you with higher and higher demands. How do you manage that without making the price of Peacock skyrocket? Well, I think that if you look at our strategy, again, we're looking at this across our entire portfolio and our entire ecosystem.

I think one of the benefits that we bring to the table with the leagues, as I mentioned, is we're not looking to just make the content available on streaming or on broadcast. It's both. And that allows us to grow reach, which is a good thing for the leagues. And I think that all that has to be taken into consideration when they're looking at how they want to go to market with their rights.

For the NFL, I mean, we've got a very long history with the NFL. They're a strong partner of ours. Sunday Night Football has been number one on NBC for 15 consecutive years. But we also entered into an 11-year arrangement with the NBA. And as I mentioned, I think they've been very happy with the relationship. We've been happy with the first year of the NBA relationship because it grew audience for us.

It allowed us to kind of manage how we're thinking about having a weekly cadence of premium sports on Sundays with the NFL, NBA, and now MLB. It's allowed us to grow more advertising. And so when the flywheel works, it allows us to partner with the leagues in, I think, creative ways. And so everything has to be taken into evaluation when you're looking at this, whether it's sports or whether it's entertainment programming.

But I think of it like a mutual fund. You know, what's the content that's gonna drive acquisition? What's the content that's gonna drive engagement? What's the content that's gonna drive frequency? Sometimes you have content, and the answer to that question could change depending on where you are in the life cycle of your business. And so you might have certain content that's a loss leader, but it's adding value elsewhere in the portfolio.

And so that's generally how we're evaluating when we're going into a rights negotiation. Like I'll give you another example of this. And so when we were launching Peacock, we entered into a relationship with the WWE. And the WWE, we thought, would be a really great addition to Peacock for a few reasons. One was I wanted to have something that was on every month.

And they've got their premium live events, which they do every month. And so that would create a cadence, which we thought was critical in streaming, which is how do you get somebody to open up your app? How do you build habituation? And so the WWE, we thought, could do that with premium live events. They also had a huge catalog of WWE programming, which gave us more tonnage.

And we also were able to look at the addressable market for the WWE, estimate what percent we thought we could penetrate. And then we know the CLV of a customer. And so then you can calculate what's the return on the investment when you're going to go after a certain rights package. So I'm sorry, what's the CLV for the listener? Like what's the lifetime value, which you're really looking at what's the ARPU multiplied by the number of months that you retain a customer before they would churn.

And so that's generally like the formula that you would look at. And so the reason I'm kind of laying it out this way is you're making decisions that are longer term. Like you're thinking about how does this fit into a broader portfolio view? And in the case of the WWE, it was actually, I think, a real win-win. We acquired subscribers through the WWE.

I think the WWE was happy with it because we were also able to bring in new viewers to sample and experience the WWE. But then when that deal came up for renewal, you know, the rates, the license fees went up pretty dramatically. And they ended up going to another streaming service. But we were actually okay with that because what we had really focused on was how do we take those WWE viewers and habituate them And what we found was WWE fans, they really like Fast and the Furious.

They really like Yellowstone. They really like, they like other stuff. I'm sorry, did you need to open the spreadsheet and figure that out or did you just intuit that one? Well, we have assumptions, but you have to test these hypotheses. And so the elegance of this strategy for us was that what you're really calculating is that, OK, well, if I don't renew this content, How many subscribers can I retain? And we were able to retain the majority of those subscribers.

And we ended up licensing a much smaller package of WWE programming. We were able to retain those subscribers because we had habituated them into other content. And then we took the money that we were utilizing to license the premium events, and we reallocated it into other parts of the portfolio. And so that's the mindset and how we are approaching these deals.

And so you know, if the economics make sense, they make sense. If the economics don't make sense, then, you know, we look to then how do we reallocate that investment into other parts of the portfolio where we try to find, you know, a comparable or better return. And so it's an evolving, like living, breathing strategy and approach in how we go to market when we're looking at any type of content, whether it's sports or entertainment.

You've brought me to the other decoder question. I think you've talked a lot about structure already. The other question I ask everybody is how they make decisions. You oversee a group called the Decision Sciences Group. You are describing a lot of decisions that take time to pay off, right? This is a strategy you set ages ago, the bet on live, you built a platform around it.

You're saying the flywheel is spinning now. How do you make decisions? What's your framework and how does that Decision Sciences Group play into it? Well, the decision sciences team, it's interesting. When I came to NBC, there was a research department, and the research department did what I think a lot of media companies would focus on, which is they're looking at the ratings, and they're looking at the demographics, and more of a very traditional approach to how they're measuring performance.

That to me is different than the muscle that I think we needed to build inside of NBCU, which is more, no, I need to better understand what drives acquisition, what drives engagement, what drives frequency, what drives retention or what causes someone to churn? What's the propensity for somebody to upgrade? What's the propensity for someone to downgrade? These are very different skills.

And so when I talked about early on having centers of excellence, At one point, there were two different groups, one doing research, one doing decision sciences. I would go into meetings, and they would have two different conclusions around how certain things were performing because they were evaluating them differently. And so one group might say, hey, this is doing really well because we grew the audience.

And then the other group would say, no, it missed its mark on the paid subscriber additions, and it's not generating the right return. And so the solution was to bring them together as one team. And it's managed by Will Gonzalez, who has done an unbelievable job in kind of now managing this as one holistic decision sciences and research team.

I think when we were building Peacock, maybe we were at a grade school level of sophistication, if I'm being a little cagey about it. I think we're now at a graduate school level. The sophistication of this team and their ability to predict and forecast across multiple different KPIs is just unbelievable. And so when we sit in a green light meeting and Donna Langley really oversees all the green lighting for entertainment, but we partner together across all of these decisions, We are looking at multiple variables.

Again, whether it's what do we think this is going to do from paid subs, from advertising, what's the brand benefit, what is the cohort for this content and other content that we think this cohort may watch on the platform, what do we think that this does to the frequency or the habituation? There's multiple KPIs that we're evaluating when we're greenlining a show.

And it also comes back to who are the audiences we're trying to reach. And one of the things that we've been able to really do is to, you know, we're not trying to cast a broad net and be all things to all people. Like we're not a flea market. We're trying to be very purposeful around how do we super serve the fandoms and the franchises that we think play to our strengths.

And so a lot of the decisioning is around how do we grow those audiences? And the decision sciences and research team, I wouldn't say that they are the decision maker, but they are providing us information to make better informed decisions. There's still an art to the science. And so you don't, in my opinion, wanna swing the pendulum so far that you're just using data to make predictions.

I think that there's a real skill that is around, how do you also understand the creative process, but then how do we utilize something like decision sciences and research to make better strategic bets? And I think that that's something that you're not going to get it right every time. But I think that we've done a pretty good job, in my opinion, in how we've been able to build out our portfolio and predicting where we thought the market was going to go.

We predicted that we thought the market was going to move towards bundling. I talked about that in 2019, where I said,

this great unbundling of cord cutting is likely gonna give rise to a great rebundling of streaming. And there was a lot of data that I saw that drew me to that conclusion. And so, you know, when we were building Peacock, I was not building Peacock to win a streaming war. I was building Peacock for growth after a streaming war. Where do we think the market was going to be? And if you look at where we are now, where you've got the market that's shifted more towards wholesale bundling, you've got this shift more towards advertising, where almost every streaming service is now ad-supported with a tier.

You've got this real focus now on live events and driving content, whether it's unscripted content or various day-parted content. I would argue that a lot of what streaming looks like today is replicating a broadcast network, a broad household demographic where there's something for everyone in the home that is dual revenue stream and that the market is moving towards bundling.

The more you get, the better the price, which is exactly how the cable industry was built. And so everything old is new again. And I think this is like back to the future. But we designed ourselves in a way betting that we thought that that's where the market would go. But equally important, we believe that that would at least play to our strengths.

And that's what would work for us at NBC Universal. So how do you make decisions? What's your framework? Well, my framework is really looking at kind of the hallmarks I mentioned earlier, which is how do we drive reach, engagement, and monetization? Those are like some of the most critical components. I think that when I project out over the next several years, if there's a streaming war, so to speak, I don't think the streaming war is going to be around subscribers or reach.

It's going to be about engagement. It's going to be about how do you grow share of time? How do you grow share of time when there's only 24 hours in a day? The average consumer spends five to six hours a day consuming media slash video. That number has been pretty consistent over the past decade. How we consume that media is obviously very different, especially based on where you are demographically.

And as more people are spending time, whether it's on social media, on user-generated content, on gaming, on podcasting, what are the things that we need to do to continue to grow share of time? Because I know the value of one extra hour per user per month, so a lot of my decisioning is around how do we grow that share of time? Because that's where everything that hangs off of the monetization and the retention and ultimately how I see ourselves continue to grow as a portfolio.

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So I was looking at our past conversation just before I started, and you are an all-star champion of not talking about your competitors. So I'm just going to say there's a red company, and let's call it a blue company. And you can guess who they are. I can just tell you, but there's a red company and there's a new blue company that just consolidated.

They're hypothetical. Yes. The red company is going through some tumult. They were built on. We want one extra minute of your time. They were built for the attention economy. They would famously say things like our only competition is sleep. And they've added things like video games and podcasts, and it doesn't seem to be working for them.

If you ran the red company, what would you do?

Well, I think the red company, in my opinion, is an incredible company. I think they've done an unbelievable job. This hypothetical company is doing such a good job. Well, I think that every company goes through changes. But I don't think that I would lose sight of what they've built. And you've got some incredibly smart people in that company.

And I would not bet against them. I think that if anybody could figure out how to continue growing share of time, I think the red company, you know, I think that they are poised for continued growth. But that to me doesn't mean that there's a winner take all. Like it's kind of like broadcast. Like when there were, you know, there wasn't one broadcast company, you know, there were four broadcast companies.

There wasn't one cable network. There are dozens of cable networks. And so I don't think somebody else has to lose for us to win. as a company. And so let me give you an example of what I mean about how I think of growing share of time. And the way I would think of it, Nilay, is don't think of us as a streaming platform. Streaming to me is too limiting.

Think of it as an entertainment platform. And on this entertainment platform, you've got tens of thousands of hours of premium video content. And you can watch what you want, when you want it. And there's also, again, all this great live programming as well. But what we do, in my opinion, with this premium content is partly fueling the share of time that's happening off of my platform.

So take an example like a show, Love Island. Wait, so let me actually ask you about the Love Island. I'm only interrupting you because we've only got a few minutes left. Is it a win for you when the Clippers clip Love Island on the TikTok? So it's a win for me in the sense that you're growing more share of audience. You're opening up the sales funnel.

If somebody sees that clip, they may have a higher propensity to then want to tune in and watch it on Peacock. And so that would be the benefit. Does the Love Island marketing team clip their own show onto TikTok? This is one of my beliefs. We do. This happens a lot. We do, and so we make our content available on almost every platform because again, you've got to go where the audiences are.

You can't, I think, be so, I don't know, like you can't go in with an assumption that you're going to be a closed ecosystem and everything has to happen on your platform. I think you've got to go where the viewers are, but in my opinion, our platform should be the best place to experience the content. And so let me use Love Island just as an example to build on the point that you're making.

which is that was the number one show for the summer. It was a bit of a phenomenon. It's a good reminder that must-see TV still exists. Appointment TV still exists, even with younger demographics. Love Island was also an interesting show because a very high portion consume that on mobile devices. which might seem obvious, but in a world where you can watch on a 60, 70, 80-inch television, you still have people who are very comfortable consuming that content on just mobile-only devices.

And so what happens? Somebody watched that show, and it was on six days a week. And then when the show is over, what we do and what every streaming service does is we say, oh, you like this show? You should watch another show. And we try to get you into, you should watch Real Housewives.

But that's not what a lot of these viewers wanted. What they wanted at the end of the show was they wanted to talk about what just happened. So they leave the streaming platform and then they go to social media or they'll look for a podcast or they'll even play a game. You know, if you could play a game, the number one that happened, by the way, over the summer was the Love Island app.

It was not ChatGPT. It was not Claude. It was the Love Island app for several weeks of the summer that speaks to what I'm describing around these fandoms. And so we are creating this demand But then I would argue we're not doing a good enough job super serving them. And then we are fueling this dark matter engagement, that's what I would call it, on these other platforms.

And so this is what's leading us to say, OK, well, what if we put the clips on Peacock and we offer it in a vertical video format? What if we create a podcast for Love Island? What if we create gaming? But it's not any game. These are games that are derivatives of the fandoms and the content that we have on our platform. Can we better super serve those fans and then grow our share of time? I think that's the opportunity.

That's the ambition. It doesn't mean that we're not gonna work with YouTube or TikTok or Reels or other platforms. I would just argue that the opportunity is that the best place for our content, our franchises, our IP should be on our platforms. But then to do that, you have to expand the aperture of what you deliver as a platform, which is why I think streaming is too limiting.

And you should really think of it more as an entertainment platform designed to maximize share of time and retention. I think the partnership that we announced with YouTube this summer is going to be an example of how we're going to see ourselves continue to drive more of that audience and engagement across our platform, but also working very closely with YouTube.

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. They have to be far more lucrative. When you go into a room with Neil Moen and he 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? 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. 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 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, YouTube 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 gonna 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 Traders 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. 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. 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? Well, I think, I think that, um, I think 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 super serve 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. That was a- Freewheel, by the way, is your programmatic advertising business. 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- 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 million 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 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 can work with other companies in a way that is really transformative. Let me ask you, I think the red company hypothetically got turned upside down because they relied on data too much for their programming.

And now they're going to change a bunch of programming executives, and we'll see where they go. Blue company, hypothetical blue company, led by the hypothetical son of a billionaire, is out in the market. They've made a big content acquisition. And he's saying, oh, we're going to 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 it. TikTok's technology without the content is just going to get you backwards. How would you, if you were running the blue company, how would you think about technology in that way? Well, I'm going to answer the question based on how I'm running our company.

No, no, why not? The blue company is new. Anything can happen with the blue company. Well, I think my answer, though, is it would not change depending on where I sat within this industry. which is I believe that we need to be an open ecosystem, that you've got to go where the viewers are. And that's what led us to do a lot of strategic decisions, whether it's the deal that I just described with YouTube.

We've done channel deals for the ad-free tier of Peacock with Amazon and with Roku. We've done bundling deals. We've done a bundle deal with Apple. We've done a bundle deal with Walmart. You're trying to give consumers choice. And everything I've done in my career has always been around a North Star of give consumers choice, what they want, when they want, where they want.

And that to me has been the mantra in how we're trying to build our company. Now, all of that being said, I still also am a huge believer in the product, in the technology, in the experience. When I talked earlier about the Olympics, you may be able to watch the Olympics on another platform through NBC or through Peacock, but I truly believe the best experience was on Peacock.

Are you allowed to say that on other people's networks? Can you go on the Amazon channels and say, this is great, but if you want the first cloud, get out of this app and open Peacock. Do they let you say that? Well, I wouldn't say it that way, though. What I would do is, first of all, I think when somebody subscribes to Peacock, they should be able to access our service regardless of the platform.

And so in that respect, we do cross-authentication, meaning you know that. And so you can subscribe and watch on Peacock, or you can subscribe and access our service through channels. I'm not here to tell the consumer what the best experience is. I think that we lead by example. I think that the consumers vote based on where they ultimately decide to engage.

And so, if you want to get access to some of these cool features that I'm describing, or if you wanna play a game that we created, or if you wanna listen to a podcast, or I'll give you another example, which is we're testing our membership program. Because we shouldn't think of viewers as subscribers. We should think of them as members, right? And so what are the other values that you can get as part of being a member? Well, maybe some of those values could be based on your tenure or your level of engagement.

Maybe you get discounts to NBC merchandise. Maybe you get special access when you go to Universal theme parks. Maybe you get discounts from some of our advertising partners like Domino's. And so how do we start to add more value? But maybe that membership is only available when you're on our platform. And so I think of it more as give consumers the choice But at the same time, we are investing in product and technology and on experiences that are really meant to be delivered upon the platform that we have created.

And we've got an unbelievable team, in my opinion, that has created a best-in-class scalable platform that not only powers Peacock, but it's the same platform that we also use to power Sky's now television. It's the same platform that we've also distributed in dozens of countries around the world. And we've got a world-class team that I think is really, when it comes to the, especially these major tentpole events, is really trying to transform and surprise and delight viewers in a way that I'm not sure other platforms are gonna be able to do around our content and our franchises.

I want to end by asking maybe the most important question of all. We're talking a lot about internet distributed businesses and consumers signing up for services and being able to churn and quit. And there's a lot of free market dynamics there, which I think are very powerful and very important. And that means you get to program whatever you want to program.

And you have chosen live and sports. And importantly, you mentioned news at the top of this conversation, that NBC News is part of this portfolio. NBC News is also distributed over broadcast. It's distributed over the air. And the Trump administration, in particular, FCC Chairman Brendan Carr, has expressed a lot of desire to pressure broadcast networks because you use the public spectrum, and in particular, news networks.

And he's withheld the broadcast licenses for ABC stations, for example. He has threatened the other broadcast networks. There's a lot of pressure on NBC News. How are you handling that? Are you pushing back? Because that is the one place where you're not allowed to just do whatever you want, right? The government gets to tell you what to say in an increasingly uncomfortable way.

Yeah, well, look, I think I give a lot of credit to Cesar Conde and the NBC News organization, who are big believers in freedom of speech, freedom of the press. I think when it comes to, and I think they're doing a fantastic job. I think when it comes to distribution of our content, especially our news programming, You know, I think that's an example where it's available everywhere.

I mean, we truly make it available not only on Peacock and NBC and over the air, but through FAST, you know, NBC News Now. Have you made this argument to the administration? Because I've met a lot of FCC chairman over the years. And what until Brendan Carr showed up, the argument they would make is we have to get away from overthinking broadcast because the audience is everywhere and they don't actually make a distinction between broadcast television and cable.

That was a Republican talking point for years and years and years. This is nonsense. The other version of that is everyone's on TikTok and the industry has to contend with that in some way and we should get more people internet access because that will actually even the playing field. Now we've come to, well, you have to use the spectrum and the public interest.

And it is different. And the government should impose some speech pressure, which, again, I think is inappropriate. But that is a new argument. And I'm wondering if you have said to the administration, look, the consumer doesn't make this distinction. And we as a company aren't making this distinction. I've not had those direct conversations myself.

Obviously, we have a government affairs team that works very closely with regulators in DC. But I think what you're saying around,

there's probably no better time to be alive than right now when it comes to being able to access content through multiple modalities. whether it's over-the-air broadcast, whether it's on social media platforms, whether it's free. If you were to look at Peacock, not only do we distribute NBC News, we distribute all of our own stations as well on Peacock, where I could be watching in New York the LA News local news, or I could be watching the Philadelphia local news.

There's no shortage of ways that we are really, I think, supporting the public good in giving them multiple ways and choices in how they want to consume and access their news programming. And I don't think that that's going to change. I think we're going to continue to advocate for freedom of speech, freedom of the press. And I think our news organization has been doing an unbelievable job in the product and the service that they're doing for the public.

Matt, to me that is, for a lot of reasons, you can tell that's an important topic for me. What's next for NBC Media Group? What's next for Peacock? What should people be looking for? Well, I think what's next for NBC Media Group, as we talked about, is we're going to, you know, this time next year, we're likely going to be a separate company as part of the new NBC.

You got to come back. There's a bunch of questions where I knew I wasn't going to get answers because the deal isn't closed yet. When that closes, you got to come back because I have a million questions. I will definitely come back. I'm really looking forward to it. I mean, I think the other piece, as you know, is we had our Q3 earnings last week.

We talked a lot about Peacock and how we had a very different strategy with Peacock. from the others when we launched our service six years ago. But I'm really proud to share that Peacock was profitable in Q3 for the second consecutive quarter. We had $261 million of EBITDA, that's $470 million better year over year. I think the team has done an unbelievable job and I feel really good about our momentum and continuing to grow.

And it's kind of good proof that there's not one way to go to market. There's not one strategy or approach. You got to play your hand and do your strengths. And you're going to see us continue to do that at NBCUniversal. There's something very, we didn't even talk about what AI might do to the cost structure of video. When you come back, we're going to get into it.

Mac, thank you so much for being on Decoder. Thank you so much.

Thank you for listening to Decoder. To get new episodes every Monday and Thursday, subscribe to our YouTube channel at DecoderPod and find us on TikTok and Instagram under at DecoderPod for more fun stuff we put out almost every day. If you enjoyed this episode, please send a link to it to someone you think you might like it. It really helps us grow the show.

You can also subscribe wherever you get your podcasts. Decoder is a production of The Verge and part of the Boxing Week Podcast Network. The show's producers are Greg Ott, Kate Cox, and Nick Statt. This episode was edited by Xander Adams. Our editorial director is Kevin McShane. The Decoder music is by Breakmaster Cylinder. We'll see you next time.

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