20 July 2015

Comcast's New Video Service "Stream"

Last week Comcast announced a new service for streaming video and DVR service not-very-creatively named "Stream". Priced at $15 a month, it seems like an incredible value, at first.

"With Stream, Xfinity Internet customers can watch live TV from about a dozen networks - including all the major broadcast nets and HBO - on laptops, tablets and phones in their home." according to a Comcast blog post by Matt Strauss.

Inattentive reporters may lump this with Netflix as a service for cord cutters. but that's very far from accurate.

Perhaps the best way to see how this service compares to Netflix, the 800 pound gorilla of over-the-top video, is to use an analysis that I learned from a great architectural historian. In the three-column analysis, the left side has the things unique to the first building, the middle has the things the buildings have in common, and the right has the things unique to the second. Given the horizontal constraints of this blog, I've transposed the analysis to top-middle-bottom.

Unique to Stream:
  • Includes live channels
  • Includes broadcast channels
  • Includes network DVR functionality
  • Content from HBO
True for both:
  • Available in Comcast's cable footprint
  • Available to Comcast Internet subscribers
  • Can be watched in-home
  • Includes significant recent on-demand programming
  • Can be watched on a computer, tablet, or phone
  • Does not require a cable video subscription
Unique to Netflix:
  • Viewable outside of Comcast's cable footprint (i.e., in any part of the US)
  • Available to customers via any form of Internet access
  • Can be watched in- and out-of-home (e.g., office, neighbor's house, mobile, coffee shop)
  • Easily viewable on a TV
  • Large library of movies and TV programs
  • Some high profile original programming
Stream is a very different service from a Netflix.

I believe the target market for this product is customers who don't buy cable video service and customers who don't have a traditional TV set, but are interested in TV programming. I don't know how many people fit in this group, but Comcast clearly will have an easy time finding its Internet customers who don't buy TV service from them. Easy targeting allows for efficient marketing.

In offering this service, Comcast gets the following:
  • An up-sell service for its Internet service
  • A press release -- "we have a strategy to address cord-cutters"
  • A way to monetize TV Everywhere infrastructure (As Comcast's post notes, "Xfinity Internet customers can just sign-up online, download our Xfinity TV app and start watching." (emphasis added))
  • A new service that should not cannibalize the core cable video business.
That's a solid list of benefits for Comcast without a whole lot of downside. Why not?
Is it a threat to Netflix? On some level, Stream is a threat. A lot of the viewing is at home and some of it is not on the TV. Streampix, a component of Stream, does include a library of movies and TV shows, so it is a poor man's Netflix on that dimension. The inclusion of the broadcast channels would appear to have a lot of value. However, if you are the sort of person who does not own a television, I wonder how much you would value broadcast content. Also, Netflix, starting at $7.99 per month, is materially less expensive.
Is it a threat to HBO Now? As an alternative way to get the content, sure. All that we know about the usage of Netflix suggests that vast majority of its usage is in the home. While Stream would not provide the benefit of out-of-home use (or on-TV viewing) that HBO Now does, it offers a lot of other benefits, that could make that trade-off attractive to some customers. Stream seems like more of a threat to HBO Now than to Netflix. Since the price of both services is the same, how do you value HBO Now's benefits (view on the TV, view out of home) vs. Stream's (get broadcast content, get DVR functionality).

Certainly Comcast benefits strategically by creating a threat to any of the threats to its core video business. A good offense is a good defense. By utilizing its existing infrastructure and customer list, the incremental cost of this service should be modest. If it turns out that Stream is cannibalizing the core video business, Comcast can always pull the plug, like Cox did with its OTT service FlareWatch.

In the future Comcast could also address the most ridiculous limitation of Stream and let people watch it on a TV. The limitation is ridiculous because it is so clearly self-imposed and so clearly designed to protect the core video service. While I understand that as a 20-year veteran of the industry; it is exactly the thing that people hate about their cable company. As Wired's headline put it: Comcast's Streaming Service Sounds As Bad As You'd Expect. It hurts because it is true.