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Can Comcast Stop Losing Video Subscribers?

A new IP-based interface, along with a broad video-on-demand (VoD) library and a fat broadband pipe, could help to reverse Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s deep video subscriber losses and get the company close to breakeven in the category as soon as 2013, a leading industry analyst believes.

Sanford C. Bernstein & Co. Inc. Senior Analyst Craig Moffett predicted as much in a report issued Wednesday that partly factors in the advantages of a new cloud-based "Xcalibur" search and navigation system, which the MSO showed off publicly for the first time at last month's Cable Show in Chicago. (See Comcast Demos New Web-Based TV Service, Comcast Confirms Xcalibur Partners and Xcalibur's Coming-Out Party? )

While Comcast has been out in front in terms of the size of its video-on-demand (VoD) vault, Moffett notes that the MSO's VoD usage has disappointed (a CAGR of just 15 percent since 2007), due in large part to the MSO's crummy legacy set-top guides. Xcalibur sets out to change all that.

"Suddenly, all that Comcast VoD content is searchable, browsable, and ... well, findable," he adds.

He's also bullish that new IP-fed video platforms such as Comcast's will help it, and perhaps other MSOs, slow the loss of video subs -- a problem that has afflicted just about every domestic cable operator. The firm estimates that the U.S. cable industry has lost 7 million subs since 2007, and seen its market share shrink from 80 percent to 60 percent.

As for Comcast, Moffett believes a "video renaissance" may be on the horizon, predicting a loss of just 283,000 video subs this year, less than half of the 757,000 it lost last year.

"By 2013, we have Comcast roughly at breakeven in video subscribers (we project a loss of less than 50K subscribers, or just 0.25%)," he added. "That would be quite a turnabout, considering that video is generally perceived as Cable's weakest link."



U.S. cable's broadband advantage could also play a role in stealing back video subs from the satellite TV industry, which is already seeing its annual rate of growth decline -- from 3.21 million annual net additions in 2004 to just 690,000 last year.

Most satellite TV subs use DSL connections to access broadband-fed VoD services from DirecTV Group Inc. (NYSE: DTV) and Dish Network LLC (Nasdaq: DISH), but Moffett sees cable modem services gaining toeholds in some of those homes as customers become more and more dependent on quality high-speed links.

As cable's broadband share grows in those homes, "Comcast and its peer cable operators can offer increasingly compelling bundles to win back satellite video subscribers," Moffett writes.

— Jeff Baumgartner, Site Editor, Light Reading Cable

Jeff Baumgartner 12/5/2012 | 4:59:58 PM
re: Can Comcast Stop Losing Video Subscribers?

It woudl also seem that Comcast and other MSOs were also willing to forgive those video losses so long as their HSD and voice services continued to grow like crazy, but that growth has been flattening out, so it's high time they put more focus on slowing down those video losses since video is still their baseline business. But you're right in that the digital video adds have helped to offset those basic video losses, which included a bunch of folks who were taking the low-end tiers anyway. Looks like the hope is that if they can get more subs to stay or add video, it could help them shore up growth of their other service bundles.


But we'll keep an eye on how Q2 numbers stack up... Moffett recalls that it's usually a bad one for cable on the video side, but likely won't be as bad as it's been in recent years.


And thanks for the reminder on that 70-70 dust-up with Martin. Those losses definitely helped Comcast stay clear of that ceiling.  JB


 




 
marjsdad 12/5/2012 | 4:59:58 PM
re: Can Comcast Stop Losing Video Subscribers?

Don't forget that losing subscribers has been part of cable's strategy for several years, for a few reasons. They didn't want to get in a price war with deep-pocketed new competitors, the telcos. Too unpredictable. A price war with anybody would have gone down badly with investors. Don't forget that Comcast is adding two digital subscribers for every analog subscriber it loses, and that ARPU is way up.


Also, after Kevin Martin's sabre-rattling about the 70-70 rule, the cablecos probably didn't mind losing a few subscribers if it means less heat from regulators. And catching up to satco HD capacity was a long process that would mean a lot more in the long run than losing some low-value analog subscribers. Somehow they managed to put together a winning business strategy and invest in their networks while losing analog subscribers. I think they kept it together pretty well, even during a bad recession, but I also agree with Neil Smit and others that it's time to win back some subs.

jefferylhenry 12/5/2012 | 4:59:53 PM
re: Can Comcast Stop Losing Video Subscribers?

After spending thousands of hours talking to video consumers (former cable customers, customers, satellite customers and non-subscribers), it's clearly about more than content and user interfaces.  It's also about how content is packaged, bundled and consumed (all you can eat, vs measured, prepaid vs post, etc).  Cable created the inhome information and entertainment business. 


Right now more than half of the ports in a typical metro market cable system are not subscribing to any services at all. Yes, there are significant innovations that could turn that around including Xcalibur. That is the business I am in, strategic innovation. I spent more than 20 years in product development, content, marketing and executive management in the cable industry. I could show you three simple changes to the customer proposition that could significantly grow broadband and video share, revenues and cashflow.


Microsoft missed the Internet. Google came years late to social networking. Pepsi didn’t notice people drinking bottled water. And Nokia didn’t really appreciate the power of software.  This is what needs to be focused on, why successful companies cannot get out of their own way?

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