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Comcast Wants OTT Video in the Cable Bundle

27 Jul, 2016 By: Erik Gruenwedel

Comcast’s recent decision to include Netflix in its broadband-based X1 set-top devices underscores the media giant’s nod to the appeal of subscription streaming video and desire to control it.

With much of the industry contemplating direct video access for consumers, Comcast envisions targeting consumers within its existing premium TV infrastructure.

“We haven't seen an OTT model that really is very profitable for us and we think that bundling our products and having business services and operating the [channel] bundle is still the best value,” Neil Smit, CEO of Comcast Cable, said on the company's July 27 fiscal call.

Stephen Burke, CEO of NBC Universal, said hype surrounding SVOD and consumer-direct OTT video, is overblown. He said 40% of domestic households already have Netflix. The executive said NBC Universal’s relationship with Netflix “has never been better.”

“They're a huge purchaser of our content. We talk to them all the time. So my prediction is it'll be quite a good thing for Comcast Cable and it'll be a good thing for NBC Universal,” Burke said.

Yet, with X1 market penetration projected to reach 50% by the end of the year, Richard Greenfield, analyst with BTIG Research, wondered why the platform wouldn’t be marketed separately as a standalone service.

Comcast chairman Brian Roberts said standalone OTT economics remain unproven as a forward strategy for channel bundle-based Comcast.

“We're about a business model where we're able to grow the [cable] customer base, have customers that have multiple products … ever-reducing churn and innovative new products that you bolt on. Maintaining that equilibrium without a network platform wouldn’t work,” he said.

Burke added NBC Universal would be sure to be included in online skinny bundles such as Sling TV, HBO Now and Charter Spectrum TV Plus.

“We have more channels and more eyeballs than anyone else and we're pretty much essential to those [skinny] bundles. I believe the vast majority of OTT subscribers will be incremental. We'll be going after people who currently are not part of the ecosystem and therefore will be additive to NBC Universal.”

Meanwhile, Comcast Cable reported it lost 4,000 video subscribers in the second quarter (ended June 30) to end the period with 22.4 million subs. The nation’s largest singular cable operator lost 69,000 subs during the previous-year period.

The sub drop represented the company’s best Q2 result in more than 10 years.

“On a trailing 12-month basis, we have now added about 90,000 video customers, a remarkable improvement in the face of significant competitive and technological change, and a testament to the investments we've made in our platform and breadth of content,” Roberts said.

Overall, Comcast added 115,000 subs across broadband and telephone, up 83,000 subs from last year. Broadband continues to be the largest contributor to overall cable revenue growth. Revenue increased 8.6% to $3.4 billion.

The company said it has reached 40% market penetration for X1, the broadband-based set-top. CFO Michael Cavanaugh said 85% of X1 subs use Xfintiy On Demand, watching on average about 29 hours of dated content. TV Everywhere platform use is up 17% from last year, with authenticated viewers watching about 10 hours of content per month on portable devices.

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