Despite recent media reports that indicated Comcast Corp. was securing digital rights on a national scale, perhaps signaling a plan to launch a future streaming bundle, sources close to the matter told S&P Global Market Intelligence that the company will continue to focus on its core cable business.
Comcast is only passively collecting digital rights, the source explained. As contracts come up for renewal, or as "most favored nation" clauses are triggered when other companies negotiate new digitally inclusive contracts, Comcast accepts those digital rights, but it does not plan to apply them to an OTT product, the source said. Rather, the plan is to continue to focus on Comcast's core business: its managed network.
Leveraging its managed cable network, Comcast has launched its Xfinity Stream service in select areas in Illinois, Indiana, Massachusetts, Michigan and New Hampshire. It will soon launch a similar managed-network digital bundle called Xfinity Instant TV that will be available initially to its broadband customers, FierceCable reports, citing sources.
Matt Strauss, executive vice president of video services at Comcast, said during the Wells Fargo Securities Technology, Media & Telecom Conference in November 2016 that a streaming offering works best when a broadband service is part of the package. With OTT services running on unmanaged networks, customers need to pay for both the content and the connectivity. The biggest opportunity around OTT is when it is offered over a managed network and as part of a service bundle, according to Strauss.
"I don't believe that there's anything that I have seen in the OTT space that I think puts us in any way at a disadvantage or prevents us from continuing to execute on delivering very, very competitive products into the marketplace. ... When you really try to evaluate the [OTT] business model, we have not seen one that really gives us confidence that this is a real priority for us," said Strauss. S&P Global's source confirmed that Comcast's position on the matter has not changed.
SNL Kagan analyst Ian Olgeirson said he believes the company's executives when they say the economics for a national unmanaged OTT service are not quite there. "I do think we will see most of the operators capitalize on some kind of streaming version of their current service. The question is do they really see racing toward a national footprint with a me-too video service that has pretty thin margins," Olgeirson said in an interview.
Jimmy Schaeffler, chairman and chief service officer of The Carmel Group, on the other hand, believes Comcast may have missed an early-mover opportunity.
"At some point in the game, cable wasn't especially viable either, but look at what they've done and what they're doing. The smart guys … saw the longer vision, and the longer vision is clearly an IT backbone," Schaeffler said in an interview. Comcast's move to a national OTT product has been slow because it is too large to reposition quickly, he said. He compared large traditional pay TV companies to "icebergs that are meeting the global warming of cord cutting."