Digital Trend Alert

 

COMCAST: Three Strategic Priorities

COMCAST: Three Strategic Priorities

Carol Ingley, President, Media Mogul Enterprises

Week of November 9 through Week of December 28, 2020

Digital Trends: Comcast, Xfinity, tripleplay, internet growth, OTT growth, Peacock, Netflix, Disney, Amazon Prime Video, Hulu, Sky

 

     King and Kingmaker. Content is king. Distribution is the kingmaker. Comcast, one of the world’s largest media conglomerates, is  both.

Content is king

     But it wasn’t always this way. For most of its corporate lifespan, Comcast has been a cable company, a leader in providing the infrastructure for delivering consumer cable TV. The cable company then morphed from consumer cable TV to the tripleplay: consumer cable TV, broadband internet and voice with its service Xfinity. Mobile and home security have also been added to Xfinity. All these services are bundled in a variety of different ways.

     For years, cable TV was the star player of the different Xfinity offerings. While “cord-cutting” of cable TV has shrunk that part of the market, the opposite has happened in the internet service portion of Xfinity. The broadband internet service is now moving into the starring role.

     “We have the best broadband network in the U.S., perhaps in the world…” Brian Roberts says in his third quarter 2020 remarks. And the third quarter results?  A record number of broadband internet subscribers were added.

     Keep in mind that Roberts is speaking about a company that is now more than a kingmaker – the distributor of content. Content is king and Comcast plays that game, too. One of the biggest opportunities for content growth for video is OTT or over-the-top distribution. OTT is video that travels on broadband internet. More specifically, OTT is a term used for the delivery of film and TV content via the internet – it does not require a subscription to traditional pay TV. As the OTT wars heat up, Comcast’s broadband internet asset becomes very important indeed.

     Content Growth Path. For a decade, Comcast has been on a content growth path. On January 28, 2011, the company bought a controlling stake of NBCUniversal from GE. It later acquired GE’s remaining interest in the company in 2013.

     NBCUniversal includes NBC (one of the big three television networks in the U.S.), Universal (a major film studio), and a significant presence in a number of cable TV channels. There is a also a division of Universal Parks & Resorts. An important acquisition by NBCUniversal was DreamWorks Animation in 2016.

     On July 15, 2020, NBCUniversal officially launched nationwide the new streaming service Peacock, competing with the likes of Netflix, Amazon Prime Video, Disney + and many others. It has a clever strategy: offer a free tier with ads as well as premium choices.

     The Peacock strategy has worked. As of the end of the third quarter 2020, Peacock had 22 million sign-ups (includes both free and paid users). As an incentive, Peacock has been packaged into Xfinity’s broadband internet service if you choose Xfinity Flex. Flex is basically free, with a streaming device at no charge that attaches to a TV with an available HDMI port. Along with Flex comes a paid tier of Peacock as well as many other streaming options.  Notes Brian Roberts, “…Peacock is continuously cited as a differentiating factor at the point of sale for Xfinity broadband products.”

Peacock Differentiating Factor

     Indeed – Comcast added 633,000 net new high-speed internet subscribers in the third quarter 2020, the best quarterly record in the company’s history.

New Subscribers Comcast Internet

     Three Strategic Priorities. The growth in OTT and the growth in broadband internet has pushed Comcast to develop three strategic priorities: broadband, aggregation and streaming -- announced in October 2020.

COMCAST Three Strategic Priorities

     Broadband. In terms of overall internet traffic in 2019, video accounted for 60.6 percent of total downstream volume worldwide. Looking just at mobile traffic, by 2025, video will consume 76% share of mobile capacity according to an Ericsson prediction. The growth and dominance of video traffic on the internet is one of the main reasons for this to be a top strategic priority for Comcast.

     Aggregation. What is aggregation and why its importance? It is a flexible platform that aggregates multiple technologies. There is a complex mix of technologies and devices in the OTT business. Without a solid aggregation solution, running a streaming service such as Peacock is simply not possible. A technology stack is a list of the technology services needed to build an application. Roberts points out that the technology stack that came from the Sky acquisition was important in recent technology development at Comcast. Aggregation will continue to be important, as devices and technologies proliferate.

     Streaming. Given that Peacock launched on July 15, 2020 (with early availability for Xfinity Flex customers on April 15, 2020), its current user base of 22 million shows phenomenal growth. The launch strategy was brilliant. But the marketplace now is ruthlessly competitive. Disney now has four different streaming services  And while Comcast is a minority owner of Hulu, that will only be for the next five years or so. Comcast may need more content to continue winning.

     Critical for Growth. In sum, Comcast is king and kingmaker – with both content and distribution infrastructure. It is well placed for growth. But this is a demanding and ever changing market. Comcast’s shift to three priorities -- broadband, aggregation and streaming-- is important. Keeping its eye on the ball of content growth will be critical for growth.

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