Roberts: ‘OTT Economics Are Unproven To Us’

Comcast will remain focused on in-market footprint strategy ‘for now’

Despite the rise of virtual MVPDs that can deliver services nationwide by going over-the-top, Comcast still believes that the most prudent business path is to grow its video sub base in-footprint.

“We just fundamentally believe, for now, that our in-market footprint strategy is where we add the most value to consumers,” Brian Roberts, Comcast’s chairman and CEO, said Wednesday on the company’s Q2 earnings call, echoing sentiments he shared in May at the INTX show in Boston

“OTT economics are unproven to us,” he added. “It’s not clear that that’s the right strategy for us.”

Comcast, however, is expanding the reach of its X1 technology platform outside its own footprint ostensibly through syndication/licensing agreements with MSOs such as Cox Communications and Shaw Communications, which plans to start rolling out X1-based set-tops later this year. Cox has already rolled out its new Contour-branded flavor of X1 across its footprint. 

But going OTT appears to be a strategy worth pursuing for many others. AT&T is planning to launch a set of OTT services, including one called DirecTV Now, in Q4, while Hulu (Comcast’s has a stake in Hulu via NBCU) works on a skinny-bundle OTT-TV that will debut next year. Several other virtual MVPDs, such as Dish’s Sling TV, Sony’s PlayStation Vue, YipTV and fuboTV, are already in the market.

Roberts said Comcast’s plan will continue to focus on growing its customer base with multiple products and reducing churn. “It’s not clear now you do that when you don’t have a network…We’re happy with the strategy that we have.”

On the video side, that strategy continues to generate improved results, as Comcast shed just 4,000 video subs in Q2, a period that is usually marked by seasonal weakness.

A big contributor continues to be X1, Comcast’s cloud-based, next-gen video platform. Comcast said about 40% of its video sub base, now at 22.39 million, is on X1, and expects that to rise to about 50% by year-end.  Comcast added 855,000 X1 customers (net new and existing) to X1 in Q2.

Roberts noted that Comcast has deployed about 8 million voice remotes for X1, as it rolls out about 800,000 new voice remotes each month.

“Overall, the feedback on X1 continues to be terrific and the voice remote is driving customer satisfaction with the platform even higher,” he said.

According to Comcast EVP and CFO Michael Cavanagh, 85% of X1 subs use VOD monthly and view 29 hours of on-demand content on average each month. Additionally,42% of Comcast subs use the MSO’s TV Everywhere platforms monthly, up 17% from last year.

Neil Smit, president and CEO of Comcast Cable, said he wasn’t sure where X1 penetration will top out, but offered a prediction that it could be in the range of 80% to 85%. “There is a part of the base that you probably don't get to because you don't want to disrupt satisfied, legacy customers who are in single-play video." 

Though Comcast apparently has no short terms to go OTT, it is starting to expand the number of OTT services that can be stitched into X1. While the number of OTT apps on X1 has been limited to Pandora, Instagram, Facebook and sports, weather and stock widgets, Comcast has work underway to provide access to Netflix on X1 later this year.

“The X1 platform gives us the opportunity to be an aggregator of aggregators,” Smit said.

Regarding the Netflix deal, he said Comcast “tossed around the decision for a while, but what it really came down to was, what’s best for the customer...and making sure we had critical mass at X1 so it made a difference." 

Also on the call, Smit said the XB6, a multi-service headless wireless gateway that will include DOCSIS 3.1, will be rolled out toward the end of this year or early 2017. He said the device, which will include WiFi-based video signal delivery to clients on the home network, will help Comcast cut down operational and capital expenses.