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2017 Home Entertainment Visionary: Comcast's Brian Roberts Has Crafted a Vision for the Digital Future

27 Feb, 2017 By: Erik Gruenwedel, Stephanie Prange

Comcast Corp. chairman and CEO Brian Roberts

Comcast straddles two worlds: a legacy pay-TV business and a rapidly evolving digital distribution model. Overseeing that balancing act is Comcast Corp. chairman and CEO Brian Roberts — the enterprising son of company scion Ralph Roberts, who passed away in 2015 at the age of 95.

Since being named president in 1990 and assuming the CEO position in 2002, Roberts has seen Comcast’s annual revenue skyrocket from $657 million to more than $80 billion. Key assets include NBC Universal and DreamWorks Animation, among others. Recognized by Barron’s as one of the world’s 30 best CEOs, named “Businessperson of the Year” by Fortune and one of America’s top CEOs by Institutional Investor nine times, Roberts has been recognized for excellence on numerous occasions. His recognition as Home Media Magazine’s 2017 Home Entertainment Visionary, however, is attributed to his unique vision in our evolving market. Roberts has embraced electronic sellthrough (EST) with extras that enhance the digital buying experience. He has spearheaded the rollout of the broadband X1 set-top box (including voice-controlled remote, cloud-based DVR, and the Xfinity Stream app). And he has incorporated subscription video-on-demand, mending fences with Netflix.

“2016 was a milestone year for Comcast in many aspects. On the video side we added 161,000 new customers, delivering our best result in 10 years,” said Matt Strauss, EVP and GM of video and entertainment services at Comcast Cable. “Under Brian’s leadership, we pushed the boundaries of innovation with our X1 platform, which is now available to 50% of our customers. He has made the platform what it is today and positioned us well going into the future.”

Roberts has made some remarkable acquisitions. These include AT&T Broadband in 2002, making Comcast the nation’s largest cable operator as well as a formidable broadband carrier; NBC Universal in 2009, which gave Comcast control of a major studio, theme parks and part ownership in Hulu; and DreamWorks Animation in 2016.

In a move that made big waves in the home entertainment industry, Comcast in late 2013 became the first pay-TV operator to sell digital movies and TV shows. The impact was immediate, as the Xfinity Store became the top digital seller of Universal’s Despicable Me 2 and Minions, and Lionsgate’s The Hunger Games: Catching Fire, among other titles.

“I think we were number two for Gravity, behind iTunes,” said Neil Smit, CEO of Comcast Cable, in 2014. “It has surprised us how well the [digital store] has done.”

“Comcast’s 2013 entrée into EST was an unequivocal game changer for the digital sellthrough market,” said Michael Bonner, EVP of digital distribution for Universal Pictures Home Entertainment. “Overnight, Comcast took its place among the industry’s top digital retailers and continues to be one of the most important distribution outlets for the studios’ content.”

“The launch of EST on Xfinity TV solidly demonstrated how another entrant into the digital transactional market can increase the category and not just share shift from others,” said Ron Sanders, president of Warner Bros. Worldwide Home Entertainment Distribution. “It proved that established MVPDs with a long history of VOD customers could be successful offering EST and not cannibalize their VOD business. Results showed that Xfinity TV could also successfully sell film and television catalog EST, proving that MVPD customers aren’t only new-release customers.”

“Roberts’ move to offer EST through Xfinity was a game changer,” agreed Bob Buchi, president of worldwide home media distribution for Paramount Pictures. “He has ushered in a significant evolution for the cable platform and added a major benefit for consumers. Cable offers an ideal platform to help make consumers more comfortable with the idea of digital ownership because they’re already familiar with the interface, and the platform allows them to access digital content immediately on their televisions.”

“The X1 box was a giant step forward in delivering a consumer interface that is easy to use and helps consumers find desired content through more-effective use of artwork and product descriptions,” Warner’s Sanders said. “By simplifying the search process, adding voice integration and providing more information about content, all consumers can easily find what they want to watch, when they want to watch it.”

Dan Cryan, tech analyst with IHS Market, also noted the consumer appeal of the fact that the Xfinity Store is accessed through a subscriber’s set-top box — a device that is already at the heart of audio-visual entertainment in the home.

“As a result, Comcast became a big retail player for new releases very fast,” he said.

“The fact that the company, under the leadership of Brian Roberts, recognized the consumer appetite for digital collection and acted on that was key in expanding the availability of digital movies and TV shows for purchase,” said Amy Jo Smith, president of DEG: The Digital Entertainment Group.

“Comcast became an early leader in enabling consumers to simply and conveniently access their Digital HD purchases directly on the living room TV.”
Last April, Comcast also entered into a licensing agreement with the digital locker service Disney Movies Anywhere, offering a selection of library titles and new releases, including Star Wars: The Force Awakens, and popular franchises “Pirates of the Caribbean,” Pixar’s “Toy Story” movies and Finding Nemo, as well as Marvel’s Avengers: Age of Ultron, and Walt Disney Animation Studios’ Frozen, among other titles.

“Disney films appeal to all generations, and now our customers will be able to easily add them to their digital collection to watch when and where they want,” said Nancy Spears, VP of digital media distribution and monetization for Comcast Cable.

In another of Roberts’ prescient moves, Comcast acquired Fandango in 2007, operating it under NBC Universal. In January 2016, Fandango acquired M-Go, a transactional VOD service co-owned by DreamWorks Animation and Technicolor. A year ago, Fandango also acquired Flixster.com and Rotten Tomatoes from Warner Bros. and last November rebranded M-Go as FandangoNow.

“FandangoNow is an incredibly compelling asset under the Comcast umbrella and yet another example of Comcast’s deep investment in evolving digital home entertainment,” Universal’s Bonner said. “With FandangoNow as part of its portfolio, Fandango has the potential to be a one-stop shop for consumer transactions in theaters and at home, as we move through various windows. FandangoNow and X1 provide two unique platforms that can further lift our industry and help to shape the digital landscape for years to come.”

Cable industry analyst Craig Moffett credits Roberts for building the industry’s premier video-on-demand library and recommitting to video when the rest of the industry was pivoting to broadband and streaming.

“Comcast may yet show itself to be the industry’s truest innovator,” Moffett wrote in a Q3 2015 earnings note.

“As windows and models evolve, it is critical that our distribution partners move in lockstep,” Universal’s Bonner said. “Comcast has shown exceptional flexibility and foresight in ensuring that both EST and VOD platforms are well positioned to co-exist and to thrive through each market progression. Its commitment to constantly innovate and invigorate its digital offerings is what cements Comcast as best-in-class and is what continues to accelerate the persistent growth of our business.”

“Brian has led a forward-thinking company developing great content that is delivered through broadcast and retail vehicles to the consumer, and at the same time offering multiple vehicles to aggregate, retail and deliver content from all providers to the consumer,” said Mark Fisher, president and CEO of the Entertainment Merchants Association. “He’s put all the pieces together.”

Comcast continues to innovate in the EST space. Last December, Comcast and four studios launched enhanced, mutable movie extras on EST titles on the cabler’s Xfinity X1 platform. Together with Universal Pictures Home Entertainment, Lionsgate, Paramount Home Media Distribution and Sony Pictures Home Entertainment, the Comcast release hailed “a new home entertainment offering that paves the way for fans to explore, connect and engage with a wide variety of online content, all while watching a film.”

“Recognized as a dynamic partner and pacesetter in the digital home entertainment space, Comcast remains wholly committed to invigorating its EST offering, underscored most recently by its collaboration with Universal to introduce through the launch of X1 the most robust enhanced extras platform in the market to date,” Universal’s Bonner said.

These enhanced extras — accessible with the digital purchase of participating titles — combine the X1 platform with a new technology standard developed by MovieLabs and its studio partners to offer “dynamic, interactive, and contextually-integrated Internet content directly within the movie-watching experience,” according to a press release. In addition to the interactive experiences, enhanced extras also include photo galleries and video clips that contextually update as the movie plays, allowing viewers to browse and enjoy content relevant to specific moments in the film.

“As content providers, we are thrilled to have the opportunity to work with Comcast to offer millions of fans direct access to purchase premium entertainment and we were proud to be one of the first to provide enhanced extras on their platform, with the release of Star Trek Beyond,” Paramount’s Buchi said. “That immersive experience, coupled with Comcast’s deep understanding of viewers and marketing prowess, makes Xfinity TV a powerful distribution partner. As Xfinity continues to enhance the service with its cloud-based infrastructure, voice remote and more, the consumer experience will become even better — and as Roberts and his team have clearly demonstrated, putting the customer first is a win for everybody.”

“As studios, we want consumers to have the best possible experience watching our movies and shows,” said Man Jit Singh, president of Sony Pictures Home Entertainment. “Comcast has led the way with Xfinity, improving the entire home entertainment experience from content discovery, through EST and VOD, and added features like movie extras. They are an innovative partner and an important gateway to millions of homes.”

Roberts has also shown a unique ability to weather setbacks, including a rejected, unsolicited offer for The Walt Disney Co. in 2004 and a deal for Time Warner Cable in 2014 abandoned due to heightened regulatory scrutiny. At the same time, Roberts faced the transformative impact of subscription streaming video led by Netflix, which many saw as a threat to traditional cable. Netflix CEO Reed Hastings openly courted Comcast, claiming his SVOD service was complementary — not competitive — to multichannel video program distributors such as Comcast. Roberts, however, at first remained steadfast in not opening the Comcast universe to Netflix. Then Comcast’s relationship with Netflix hit somewhat of a low point in early 2014 when the companies announced a controversial agreement whereby Netflix reluctantly agreed to pay Comcast a premium for smoother streaming access on its broadband network. Civil liberties organizations decried the deal, claiming it underscored ISPs’ growing control of the Internet.

“Residential ISPs should be in the business of charging their users for access to the Internet, not of charging the rest of the Internet for access to their users,” said John Bergmayer, senior attorney at Public Knowledge.

Hastings vented publicly on social media about the ISPs’ perceived heavy-handed control of online video content delivered “the last mile” into U.S. pay-TV homes. While Comcast hadn’t deliberately clogged the broadband pipe, it had used Netflix’s heavy streaming traffic (32% of primetime market) as leverage in the deal. (Comcast is the largest Internet service provider in the country with more than 56% market penetration.) With many Netflix subs using Comcast for their broadband access, the SVOD service decided to pay the cabler instead of risking customers suffering through episodes of “House of Cards” that might sputter and pixelate. Some observers contend Netflix’s pain resulted in action in 2015 by the Federal Communications Commission, which voted to make the Internet a public utility. The net neutrality guidelines meant ISPs couldn’t charge companies such as Netflix additional fees for smoother broadband access, among other provisions. The FCC, now headed by a regulation-adverse chairman, could revamp key measures of net neutrality.

But Roberts, who watched Netflix roll out global access in January 2016, had seen enough. Like Time Warner CEO Jeff Bewkes before him, he (observers say wisely) made peace with the SVOD pioneer. Last September at the Goldman Sachs Communacopia Broker Confab in New York, the executive walked analysts through direct access to Netflix on Comcast’s X1 box. The pact put Netflix’s content on equal footing with Comcast’s 85,000 on-demand programs. Using the X1 voice remote, subs could search Netflix programming and episodes, in addition to switching back-and-forth to pay-TV with a click of a button.

“This is something we have worked out with Netflix … [which is] great for consumers,” Roberts said, crediting former critic Hastings for making direct access happen on Comcast.

“Our organization made a conscious decision that we are going to aggregate other people’s content, some of which we sell directly and some that we don’t,” Roberts said. “We spent a lot of time talking about how to make this — put the consumer in charge — and frankly working through this, the two companies have gotten a lot closer.”

While direct access to Netflix isn’t new, having it embedded in the nation’s largest cabler’s ecosystem is huge.

“Undoubtedly, it was a significant move,” said IHS’s Cryan. “Comcast has emerged on the forefront of pay-TV operators, getting seriously into digital distribution. And Roberts has pushed that narrative.”

To Comcast, said Cryan, the SVOD pioneer had developed into a premium cable network.

“And premium TV is a business Comcast does very well,” said the analyst, alluding to the pay-TV operator’s relationships with Starz, Showtime and HBO.

“Not only did Netflix become very difficult to ignore, but it had become a legitimate premium network, which is something Comcast is comfortable dealing with,” Cryan said.

About the Author: Erik Gruenwedel

About the Author: Stephanie Prange

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