NBC to launch free streaming service in 2020

NBC is doing a solid for the traditional pay-TV industry.

Comcast‘s NBCUniversal plans to debut a free ad-supported streaming service to anyone that subscribes to a traditional pay-TV service, including competitors such as Charter, AT&T, Cox, and Dish, in the first quarter of 2020, the company announced Monday.

For those that don’t subscribe to a pay-TV service, the streaming product, which will include 1,500 hours of NBC TV shows, such as SNL and Parks and Recreation, and hundreds of hours of Universal movies, will cost somewhere around $12 a month, a person familiar with the company’s plans told CNBC. The service will be run by Bonnie Hammer, the company announced Monday.

NBC’s plans are contingent on striking deals with the largest pay-TV providers, which it hasn’t yet done. Still, the product will be free for customers of those providers, so NBC doesn’t plan on any challenges when it comes to inking those agreements.

Instead of charging money to all subscribers, NBC is banking on getting about $5 worth of advertising revenue per month per user, the person said. Because the service will be free for the millions of people that already to subscribe to pay-TV, NBC is banking on quickly scaling to 30 million or 40 million users with its service, as opposed to slowly scaling a paid service and starting at zero subscribers.

NBC will air between three and five minutes of ads per hour of programming, the person said. As NBCUniversal was planning its new streaming service, it conducted research to look into what customers thought about ads. The research showed that people preferred to watch a few minutes of ads rather than pay a monthly free. Traditional TV can have up to 15 minutes of ads per hour.

The company sees an opening because there is no long-form, ad-supported streaming service, the person said. For example, Hulu costs $7.99, but has regular ad breaks. Netflix has long-form content, but costs a monthly fee. And YouTube is primarily short-form, user-generated content and supported by ads. NBCUniversal does not plan on aggressively pulling back shows and movies it has licensed to other streaming services, the person said.

NBCUniversal will be throwing its hat into an expensive and competitive ring. Streaming incumbents Netflix, HBO and Hulu are upping content spend and doubling down on original programming to stave off market share threats from new entrants like Apple, AT&T and Disney, which are set to launch its streaming service later this year.

Also Monday, NBCUniversal announced a reorganization of senior leadership. Mark Lazarus, currently chairman of NBC broadcasting and sports, will take on a larger role and oversee the company’s cable and news divisions as well. Jeff Shell, currently chairman of Universal Filmed Entertainment Group, has been named chairman of NBCUniversal film and entertainment. Donna Langley will take over as the sole chairman of Universal Filmed Entertainment Group.

Disclosure: NBCUniversal is the parent company of CNBC.