Stephen Burke, CEO of Comcast’s NBCUniversal content division, told shareholders that he doesn’t think the streaming TV business is any good. NBCUniversal has streaming deals with all the major Internet TV providers, including DirecTV Now, Sling TV, YouTube TV, PlayStation Vue, FuboTV and Hulu. Burke noted while these deals are “very favorable” to NBCU in terms of licensing revenue, those deals have only contributed “marginally” to the company’s revenues.
“It’s a very tough business,” Burke said during the company’s Q2 earnings call. “As we’ve said before, we’re skeptical that it’s going to be a very large business or profitable business for the people that are in it. And they’re off to a relatively slow start.”
The crowd of Internet TV services are definitely off to a slow start. Dish Network’s Sling TV – which readers may recall was the first to market for a streaming pay TV service in 2014 – has just 1.3 million subs as of last quarter; AT&T’s DirecTV Now service has amassed just 500,000 subs; Sony’s PlayStation Vue service has been hampered by a slow market roll-out, due primarily to its broadcaster partners, and YouTube Live TV is suffering the same fate. Hulu Live, of which NBCU is a non-voting owner, has been available for only a few months now and hasn’t released any subscriber numbers yet.
But that hasn’t deterred Comcast from trying to tap into the Millennial market that these streaming TV services are targeting. During the same earnings call, Comcast Cable head David Watson sketched out a few more details about the “Instant TV” service that Comcast promises to launch during the second half of the year. Watson has said the service will target Millennials within Comcast’s broadband footprint that don’t already subscribe to pay TV, which pits it squarely against Dish’s Sling TV and AT&T’s DirecTV Now. The Comcast service will be delivered over its managed IP network, and won’t require any special hardware in the home.
“This is an in-home Title VI cable service, with a managed network, without a set-top box,” Watson said. “So it’s ideal for certain segments and Millennials in the test markets.” The comment about being Title VI is all about whether or not this category of services comes under the jurisdiction of the FCC under the 1996 Telecommunications Act, and this claim has never been scrutinized by a court.
The Instant TV product is a revamped version of one of Comcast’s earlier experiments, called Stream. And knowing Comcast, Instant TV will likely only be available to its broadband subscribers that don’t already subscribe to Xfinity TV. Comcast lost 45,000 pay TV subs during Q2.
“Instant TV gives us one more part of the portfolio to be able to go after different segments with,” Watson added. “So it’ll be fully launched towards the end of Q3 and will be part of our go-to-market approach.”
But it’s a bit amusing to hear Burke dismiss streaming TV while Comcast is prepping just such a service, and while NBCU’s own linear TV ratings, across both broadcast TV and pay TV, have suffered as more viewing moves online. During Q2, NBCU’s broadcast revenues increased 5.3%, with distribution and licensing revenue increases making up for the 1.2% decline in advertising revenue. On the pay TV side, NBCU’s networks’ advertising revenue fell 0.9% during the quarter, while distribution revenue rose 8.1%.
While TV networks continue to balk at the popularity of streaming TV, service providers who are rapidly losing customers have seen the writing on the wall and are looking at alternatives that’ll keep the broadband subscribers happy. To this end, the National Cable TV Cooperative just struck a deal with Sony to enable its smaller pay TV providers to bundle PlayStation Vue subscriptions with broadband. The NCTC also has a deal with sports-centric streaming TV service FuboTV for bundling with broadband subscriptions.
Of course Burke is perfectly aware that the Internet will become the dominant form of video distribution – whether linear or on-demand – in the near future. “Linear ratings are going to continue to decline,” he said during the earnings call. “I’m not sure if the decline is going to speed up or slow down. I think the safest thing is to assume it’s going to continue.”
So the question is this: with linear TV is on the way out, what does the future look like for NBCU?
Burke says Internet video monetization will help, but what he really means is better measurement of how its programming performs across platforms, devices, and time slots. “The first part of our challenge is to make sure that we monetize better, that we get ratings and then monetization at a better rate than we currently do with consumption on the Internet,” he said. But beyond that, Burke doesn’t seem to have any ideas.