Brian Roberts, CEO of Comcast (L), and Tom Rutledge, Managing Director of Charter Communications
Drew Anger | Getty Images
It’s easy to ignore last week’s announcement that Comcast and Charter have launched a joint venture to gain nationwide market share in streaming video distribution. But America’s two biggest cable companies may be playing a long game that could open a new chapter in the streaming wars.
Comcast and Charter said they have developed a 50/50 business to push Comcast’s Flex streaming platform into more homes across America. Comcast will grant a Flex license to Charter, allowing Charter’s Spectrum subscribers to access the interface. Comcast will also bring its smart TV business (XClass) and ad-supported free streaming service Xumo to the company.
Charter, in turn, will make an initial contribution of $900 million to fund expenses and expansion. Additionally, Charter will offer devices powered by Flex and associated voice-activated remotes, starting in 2023. Although Flex is not a new product, the partnership nearly doubles the device’s potential installation footprint.
At first glance, it seems Comcast and Charter started this partnership years too late. Roku, Amazon, Apple, and Google have been making streaming aggregation devices and software for over a decade. Samsung’s smart TVs come with their own built-in streaming platform. Plus, Netflix’s revelation last week that it lost customers for the first time in over a decade suggests streaming subscribers may have peaked in the US, at least for now. .
“It’s hard for you to imagine how successful they’ll be given the number of years we’ve invested in our platform and our competitors as well,” Roku CEO and Founder Anthony Wood said of the Comcast-Charter company. during his company’s earnings conference call on Thursday.
Wood added that it’s historically been difficult for companies to compete with Roku on streaming distribution, as rivals like Comcast and Charter have sprawling businesses, while streaming is Roku’s sole focus. Roku is No. 1 in big-screen streaming market share, according to research firm Conviva, followed by Amazon Fire TV and Samsung.
Still, Comcast and Charter have one major advantage that no other streaming competitor has – technicians who walk into the house.
Home court advantage
Almost every person or family moving into a new house or apartment needs to install home broadband. Comcast and Charter are the largest home broadband connectors in the country.
Hundreds of millions of American households already use a streaming device and may not feel the desire to switch. But Comcast and Charter serve more than 200 million American homes combined. Comcast CEO Brian Roberts and Charter CEO Tom Rutledge may be united on a strategy to tell their broadband technicians to connect Flex devices when connecting homes across the country to the Internet.
Currently, Comcast and Charter don’t have many consumer benefits to market with Flex. Companies can market the user interface, but it’s hard to sell consumers something they may never have seen. Comcast’s voice-activated remote makes it easier to find content among a bunch of streaming services, but Roku and Amazon have voice-activated remotes as well.
In other words, there aren’t many obvious reasons for someone to use Flex on any device a consumer already owns. But TVs and streaming devices eventually get old. Flexboxes, at least for now, are free for new broadband subscribers.
If there’s one industry that knows the video distribution business, it’s cable.
Small media and entertainment company executives have said privately that they are surprised the streaming packages have yet to materialize.
“I don’t see a big push to do that,” Netflix co-CEO Reed Hastings told CNBC in 2020, when the company’s market valuation was more than double what it is today. today. “It might be nice to experiment with that in some countries, but it’s not a big area for us.”
Netflix’s recent share tumble and indications that customer losses will accelerate in the next quarter could be the catalyst for streaming bundles — a product that’s starting to look like a smaller version of the cable bundle. .
If Netflix agrees to sell a bundled product — say, purely hypothetically, with Starz, Peacock, and Paramount+ — for a block discount, a third-party distributor will need to sell that bundle and authenticate the buyers of the bundle.
Apple, Roku, Google, and Amazon could all be that third-party bundle.
But the “OG” video distributors are Comcast and Charter – the cable companies. Selling lots of video content has always been their business.
And now they’re trying to put streaming devices in the homes of millions of Americans. It’s not too hard to assume that they would want to sell customers a bundle of video subscriptions to go along with installing these boxes.
“Not only will we bring these products to millions more customers, but we’ll open the door to whole new revenue opportunities,” Roberts said on Comcast’s earnings conference call last week.
Rutledge added on Charter’s earnings conference call that it’s only a matter of time before nearly all of the company’s customers will get streaming video rather than cable connected TV.
“I expect that gradually most of our clientele will be [Internet protocol],” he said.
It won’t happen overnight. But it makes Comcast and Charter’s JV play much more sense. They’re playing the long game of streaming wars — and hoping the end result will look a lot like cable TV 2.0.
Disclosure: Comcast is the parent company of NBCUniversal, owner of CNBC.
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