I’m a huge fan of investing in yourself. Whether it be personal or a company, the benefits of compounding can lead to huge returns. However, every now and then some companies in a sign of desperation take it too far. I recently stumbled upon Peacock’s financials and was surprised at quite how ugly they were. A $3B loss on $2B in revenue with 30M users…. is UGLY. Let’s dive in and see if we can find any saving hope.
One of the many problems with Peacock is that it is too late. They already lost. The unit economics make no sense. $3B loss to maybe gain 20M users at $5 to $10 per month with a 5%+ churn rate. They do have some great base content, but not enough to make this endeavor worth it.
To overcome a $3B loss, assuming a 40% dropout rate and $105 per user (Netflix’s GM%), you would need 71M more users (not counting high churn). These are all absurd assumptions. The unit economics make no sense here.
Making this even worse – Peacock has a ton of great content that they could be monetizing in other ways.
Fierce Competition for the 5th place
Furthermore, competition in streaming is fierce. Netflix has already won the market via strong tech/great brand/okay content, and Amazon/Apple have money to spare and have shown no signs of slowing down. Disney is poised to be a key player. Hulu is a decade ahead in the market. Paramount is similar to Peacock but in a slightly better position.
Wrap It Up
I’m in favor of disrupting oneself; you just need to be smart about how you do it. I’m no expert here, but perhaps that $3B loss includes a significant amount of one-time expenses. Worse yet – Peacock is only a small part of Comcast, so we have no clear way to play this. It’s just too late for Peacock to be blowing this much money. This is disrupting yourself in the wrong way.