Comcast’s charter joint venture points to a new chapter in streaming wars

Brian Roberts, CEO of Comcast (L) and Tom Rutledge, chief executive of Charter Communications

Drew Angerer | Getty Images

It’s easy to shake off last week’s announcement Comcast Other paper have started a joint venture to gain market share nationwide in streaming video distribution. But the two biggest US cable companies could play a long game that could lead to a new chapter in the streaming wars.

Comcast and Charter said they have developed a 50/50 venture to push Comcast’s Flex streaming platform to more homes across America. Comcast will license Flex to Charter, giving Charter Spectrum subscribers access to the interface. Comcast also wants to contribute to the venture with its smart TV business (XClass) and free ad-supported streaming service Xumo.

Charter, in turn, will make an initial contribution of $ 900 million to finance the expenses and expansion. Additionally, Charter will offer Flex-operated devices and related voice-controlled remotes, starting in 2023. While Flex is not a new product, the partnership nearly doubles the potential installation footprint of the device.

On the surface, it appears that Comcast and Charter began this partnership years too late. roku, Amazon, Apple Other Google has been manufacturing streaming aggregation devices and software for over a decade. SAMSUNGSmart TVs have their own integrated streaming platform. Also, the Netflix reveal last week lost customers for the first time in more than a decade suggests that streaming subscribers may have peaked in the US, at least for the time being.

“It’s hard for you to imagine how successful they will be given the long number of years we’ve invested in our platform and our competitors as well,” said Anthony Wood, CEO and founder of Roku, of the Comcast charter firm. Thursday during her company’s earnings conference call.

Wood added that historically it has been difficult for companies to compete with Roku in streaming distribution because rivals such as Comcast and Charter have booming businesses, while streaming is Roku’s sole focus. Roku is No. 1 in the market share of streaming large-screen devicesaccording to research firm Conviva, followed by Amazon Fire TV and Samsung.

However, Comcast and Charter have a big advantage that no other streaming competitor has: technicians coming into the house.

Advantage of the home court

Almost every person or family who moves to a new house or apartment has to set up home broadband. Comcast and Charter are the largest high-speed broadband home connectors in the country.

Hundreds of millions of US households already use a streaming device and may not feel the desire to change. But Comcast and Charter serve more than 200 million US families combined. Comcast CEO Brian Roberts and Charter CEO Tom Rutledge can join forces on a strategy to tell their broadband technicians to connect Flex devices when they connect homes across the country with the Internet.

Right now, Comcast and Charter don’t have many consumer benefits to market with Flex. Businesses 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 easy to find content in a bunch of streaming services, but Roku and Amazon also have voice-activated remotes.

In other words, there aren’t many obvious reasons someone is using Flex on any device a consumer already owns. But TVs and streaming devices eventually age. The Flex Boxes, at least for the moment, are free for new broadband subscribers.

If an industry is familiar with the business of video distribution, it is the cable industry.

Grouped streaming

Executives from smaller media and entertainment companies privately said they were surprised that the streaming bundles haven’t already been made.

“I don’t see a big push to do it”, Netflix co-CEO Reed Hastings he told CNBC in 2020, when the company’s market valuation was more than double its current value. “It might be okay to experiment with it in some countries, but it’s not a big area for us.”

of Netflix recent stock crash and the guide that customer losses will accelerate in the next quarter could be the catalyst for streaming bundles, a product that is starting to resemble a smaller version of the cable bundle.

If Netflix agrees to sell a bundled product – let’s say, purely hypothetically, with Starz, Peacock, and Paramount + – for an overall discount, a third-party distributor will have to sell that bundle and authenticate buyers of the bundle.

Apple, Roku, Google, and Amazon could all be those third-party bundlers.

But the distributors of “OG” videos are Comcast and Charter, the cable companies. Selling video content packs has always been their business.

And now they are trying to put streaming devices in the homes of millions of Americans. It’s not a quantum leap to assume they want to sell customers a package of video subscriptions to go along with installing those boxes.

“Not only will we bring these products to millions more customers, but we will open the door to new revenue opportunities,” Roberts said during Comcast’s earnings conference call last week.

Rutledge added during Charter’s earnings conference call that it’s only a matter of time before nearly all of the firm’s customers are getting streaming video instead of cable TV.

“I expect that incrementally the bulk of our customer base will be whole [Internet protocol]”He said.

This will not happen overnight. But it makes Comcast and Charter’s JV game much more sense. They are playing the long game of streaming war and hope the end result looks a lot like Cable TV 2.0.

Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.

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