Comcast’s move this week to put its entire cable TV bouquet into an app – could mean it is within a hairs breadth of moving beyond its broadband footprint, and taking on an entirely new business model for video.
This first step is to offer an “X1-like experience” outside of the home – not just on mobile devices and laptops, but on the road, so potentially when customers are on non-Comcast broadband lines.
This represents Comcast hammering another nail into the coffin of traditional cable TV in the US market – partially accepting the premise that the only value left in cable is broadband, not video – but it wants to hang on to its video customers and even attract more, even if that means heading off in a new direction.
The brand new streaming app will come out at the end of this month and is called Xfinity Stream, notionally as a replacement for its four year old TV Everywhere service Xfinity TV. While Xfinity Stream’s predecessor was purely a slimmed down streaming app, the upgraded version will give Comcast’s pay TV subscribers unprecedented access to full X1 features in all their glory, on multiple devices, anywhere, over any connection.
Comcast hasn’t yet taken the full plunge to target cord cutters, but it has been testing the waters with its Stream TV service, a $15 a month live and on-demand IPTV streaming service which launched in July 2015. Stream TV users can already pay for TV Everywhere programming over any internet or mobile connection. There is also Comcast Watchable, a free short-form OTT video service aimed at Millennial and Generation Z viewers, but this is hardly worth mentioning.
Stream TV initially rolled out to internet customers in Boston in November 2015, and Comcast spoke about fully opening up the service to any internet user in the US, but this never happened. We think it is likely this is because as Stream TV approaches its second birthday, the service is feeling increasing pressure from Sling TV and Sony’s Vue, which are genuine OTT video services and so Comcast wants to go all in on OTT with Xfinity Stream.
Stream TV is currently a standalone service separate from Xfinity Stream, but Comcast said it plans to integrate Stream TV into the newly launched app in the future and will likely rebrand it to avoid the obvious confusion that arises with the clash of names. We suspect that multiple licenses, subscriber terms and content deals will be made available to slowly suck non-Comcast users towards its more expensive cable options.
Both AT&T with DirecTV Now and Comcast with this announcement are saying publicly that they want to keep their existing customers on either satellite or cable, but they are clearly both considering a future when that may no longer be possible.
This sounds like Comcast saying it is going to remove the standalone subscription option once the two apps are merged, but we may be wrong. If this does happen to be the case, and Comcast kills off Stream TV along with its small but growing subscriber base, then how else will it continue to publish sugar-coated video numbers? It will need some OTT offering going outside its existing customers base.
Comcast’s full year 2016 results showed 80,000 video customer additions to leave it on 22.5 million, plus 385,000 broadband subscriber gains, putting it on 24.7 million in total. However, a large chunk of those 80,000 video adds will be for the less profitable Stream TV. The clear answer is to have a number of OTT options all the way up to Xfinity Stream, which bring in more profit on a larger bouquet of channels and VoD viewing.
Faultline Online Reporter has repeatedly highlighted how the video element of OTT has so far been intrinsically less profitable than a genuine cable contract, but Comcast has a 24-month minimum broadband contract every time someone decides to become a new broadband customer, with additional OTT video.
AT&T, on the other hand, doesn’t use the Comcast and Dish tactic of hiding the weakness of its TV subscribers by glossing up numbers with the far less profitable OTT customers. It recently published additions of 200,000 subscribers to the DirecTV Now service which launched last November, and could be well on its way to 1 million by its first year in the field. Investors will want Comcast to follow its lead, which is why it also needs a cellphone service in the next 12 months also.
Comcast’s 2016 revenue was up 9.2% to $21 billion and net income was $9 billion for the year, and $2.4 billion for the final quarter of 2016. Video ARPU for Comcast is roughly $135, OTT is just $15 – at that price it will only be a matter of time before both profit and revenues are negatively affected.
Xfinity Stream includes 200 live channels, 40,000 VoD titles, remote access to DVR content and the ability to download content to mobile devices and laptops. Channels include sports networks ESPN, Fox Sports and NBC Sports, plus premium networks, Music Choice channels and is also available in Spanish.
DirecTV Now costs $70 a month for 120 live channels, so there is no way Comcast will be offering a service with the features of Xfinity Stream as a standalone service for any less, and it may well position the new app as a springboard to save Stream TV from drowning, or it could just as likely introduce it alongside a new cellphone service, and offer the video for free for a long term cellular sign up.
Matt Strauss, EVP and GM, Video and Entertainment Services at Comcast Cable, said: “We’re focused on creating the best entertainment experiences across platforms and continuing to give Xfinity TV customers more choice in how, when and where they access their content. With the Xfinity Stream app, we are giving customers access to the best content in and out of the home with a growing list of advanced features and capabilities that make the mobile experience nearly identical to the cable experience they enjoy at home.”