Peacock announced a savvy move yesterday, tiering access to “The Office” when it moves to Peacock on January 1st from its current home on Netflix. Peacock said that seasons 1-2 will be available for free, with ads, but that seasons 3-9 will only be accessible on its Peacock Premium (with ads, $5/month) and Peacock Premium Plus (without ads, $10/month) tiers. Paying subscribers will also get access to longer “Superfan Episodes” which are extended cuts with previously unseen footage, starting with season 5.

The tiered approach makes a ton of sense. Signing up for free is a no-brainer for existing fans who want continued access and will follow “The Office” from Netflix to Peacock. That will help drive up the number of Peacock signups which last week stood at 26 million. For now, this is the only metric Peacock is publicly reporting; it hasn’t yet revealed how many paying subscribers there are.

“The Office” fans will no doubt be exposed to lots of promotions and ads to sign up for the premium service to keep watching seasons 3-9, especially for the Superfan episodes. So this group of viewers provides both a bump in free signups and a very cost effective upgrade path mainly focused around “The Office.”

For non-fans, the tiered approach means Peacock can promote the well-known show as a strong lure to non-fans to give Peacock a try if for no other reason than to sample “The Office.” While all streaming services heavily promote their original programming - often by focusing on the talent’s prior history - Peacock can leverage the high awareness of “The Office” and its cast, which will likely resonate well. But even if these viewers don’t become fans, Peacock will have them in the door and can promote other programming to view for free.

When it introduced Peacock, NBCU executives emphasized the free value proposition as a clear differentiator in a market swamped with subscription competitors. Because high-quality content can be monetized so effectively now with ads especially on connected TVs, Peacock understands that even free can be highly profitable on its own.

But more importantly, as is the case with “The Office,” free gives Peacock various approaches to optimize the value of marquee programming. As Colin and I discussed last week on the podcast, ViacomCBS is doing something analogous by offering a free Showtime channel in the Pluto TV service.

As we head into 2021, the competition among SVOD services is going to intensify. While there’s a place for 7-day free trials, consumers will become more reluctant to enter their credit card information knowing that their own inertia could lead to months of charges long after they binged the show that initially drew their interest. In this context, having a free tier to function as an easy on ramp for sign-ups is going to increase in value. In deciding to include two seasons of “The Office” in its free tier Peacock made a savvy move to capitalize on free that will pay off in multiple ways.