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The Industry

A Comcast Product for Cord-cutters

It’s been interesting to watch how the big cable companies have been trying to battle cord-cutting. Comcast has had a product for a while that is aimed directly at cord-cutters.  It’s labeled as Flex and is a video streaming service that is only available to Comcast broadband customers who are not buying a Comcast TV product.

Comcast hoped that Flex would be a direct competitor to Roku, Amazon Firestick, and Google Chrome. The Flex product clearly wants to keep customers who cut the cord inside the Comcast umbrella.

The product delivers 10,000 programs including Comcast content and content from other free online services like Pluto, Xumo, and Tubi. Content comes with commercials. For now, Comcast is also throwing in Comcast’s paid service Peacock for free. The Flex platform also gives customers an easy portal to watch Netflix, Amazon Prime, HBO, and Hulu.

Flex is certainly price right and currently is free for Xfinity broadband customers. When first introduced, Comcast was charging $4.95. Flex still requires the Comcast settop box and remote. I’m guessing the price came down when Comcast found few buyers willing to rent a box to get free content.

There is a big difference between Flex and competitors like Firestick or Roku in that customers can only use the apps on the platform that Comcast has installed. No additional apps for video or music services can be added to the app. This is probably the biggest disadvantage of Flex in that people are using a lot of different video apps online. I have an Amazon Firestick and it will let me add any online video app regardless of whether the app provider has a deal with Amazon.

When Comcast first introduced the Flex product, I thought the company wanted to become another superbundler like Amazon. Amazon allows customers to buy a subscription to a huge array of different online apps, and I assume Amazon gets a slice of revenue for delivering customers to partner video platforms. There are many video services for which Amazon has become the primary marketing channel. Amazon even suggests content that requires a subscription to the partner apps. The superbundler concept is likely profitable. Amazon has to be doing well taking a small slice of the revenue stream from nearly one hundred other platforms.

Amazon’s made it clear a few years ago that it wanted to become the one-stop shop for online video content, and Amazon has bundled together far more content than anybody else. But in the last year, we’ve seen the rise of proprietary platforms from CBS, Apple, Disney, and others including Comcast’s Peacock that won’t cross-market with Amazon and others. It’s not looking like any one bundler is going to be able to pull together a giant percentage of online video content.

It’s less clear how Comcast intends to benefit from Flex. I assume Comcast gets a share of ad revenues generated on platforms like Pluto. But there doesn’t seem to any other major benefit to the company for operating the Flex program, particularly since they are providing the settop box to Flex customers for free. The plan probably made financial sense at a monthly $4.95 rate, but it’s hard to see the long-term benefit to Comcast of offering a free service. Perhaps the one big benefit to Comcast is that the settop box used for Flex can also be used to control smart home and other Comcast products. Perhaps the company is using Flex to draw in customers for these other products.

Comcast has one big advantage over anybody else in the industry in that every Flex customer is already a Comcast broadband customer. That should mean that Comcast has little incremental cost for delivering the free content offered by Flex. It’s easy to forget that Netflix and all of the other online providers must maintain an expensive network to enable them to disseminate video content.

The Flex product is somewhat symbolic of the attempt for industry players to somehow be relevant in the online video market. The product doesn’t drive direct revenue for Comcast even though the company must provide a settop box. The platform is proprietary, which seems to be the new norm for video platforms. It’s one more of the many confusing choices faced by cord-cutters.

Categories
The Industry

If All Programming Went Online

Recently, in a comment made on one of my blog posts, somebody postulated that eventually cable lineups will get much smaller and cable companies will be reduced mostly to a platform to broadcast live sports events. That is a possibility because sports are clearly the most valuable programming asset that broadcasters have today.

But even in the sports world we have seen some experimentation with the web. On fall Saturdays, for every football game that is on one of the cable sports networks there are a lot more games that are only on ESPN3, the online channel from ESPN. For most of these games online is the only way to view them. And even ESPN itself has allowed their ESPN, ESPN2, ESPNU, ESPN Deportes and the SEC Channel onto Sling TV and it’s likely they are negotiating the same deal with others.

But let’s assume for a second that the more lucrative sports like pro football stay off the web. What might a world look like where most programming was streaming rather than broadcast?

First, this would create a huge increase in web traffic, particularly in the evenings in each time zone. According to Nielsen, in 2014 the average home watched broadcast TV for almost 143 hours per month while the average home watched streaming video on the Internet for 6 hours and 41 minutes. This means that less than 5% of video programming being watched is on the web. The companies that control the Internet have already been screaming about the impact of Netflix on their networks, and yet the web is still only carrying a small portion of the video content that people routinely watch.

There are certainly problems to solve before we can put most video on the Internet. One must first consider the difference between broadcasting live video versus streaming video like Netflix does. There is not a lot of live video on the web because the web architecture is not really designed to always deliver content exactly on time. I’ve reviewed Sling TV on my blog a few times and their live sports programming is so terrible that it’s basically unwatchable. Anybody who has watched ESPN3 will tell you a little better story, but even that is not great. ESPN3 mostly is made to work by sending out fairly low quality video to hold down the bandwidth demand. And unlike Sling TV, ESPN seems to have invested in carriers with a more robust backbone. The live streaming problem is not just about sports because many of the other popular shows that have been aired live on the web, like the Oscars, have been a debacle.

There is a huge difference between live shows and streamed video. Netflix can send out many copies of a streamed video at the same time because each end user is basically downloading a large file. As long as the download speed can stay ahead of where the show is being viewed then the viewer gets the intended quality. It doesn’t matter if the download process is erratic as long as the viewer stays ahead of the download. But live shows must be delivered immediately and to many homes at the same time. And when there is any glitch anywhere in the network, the live broadcast is going to hiccup or crash. If there is a local problem then only a few viewers have a problem, but if there are network delays then many viewers will suffer.

The results of moving everything to the web would be dramatic at the customer end of the network as well. The first issue would be all of the customers using DSL or slow cable modems that can’t easily receive multiple video streams. The FCC set the new standard of 25 Mbps download based upon homes wanting to watch 3 videos simultaneously as well as doing other normal web things. If you are sitting today on a 6 Mbps DSL line you already know that watching even one Netflix stream can sometimes be a challenge.

But even assuming that everybody gets upgraded speeds (which might be hard since most DSL won’t go much faster), I still have to wonder how the cable companies and telcos would handle a 10 times increase in video download demand. Almost all local networks have some sort of shared nature. In fiber-to-the-home networks a data stream is typically shared with up to 16 homes. But in cable networks that number can be greater than 500 homes.

You don’t have to remember back more than a few years when the speeds on cable networks almost died every night during prime time as most homes got on the computer. Cable companies have responded by increasing the size of the data path to the nodes and by cutting many nodes in half. But a 10 times increase in video volumes would bring every cable network to their knees. They would have to construct a lot more fiber and they would need to reduce the size of their nodes down to something a lot closer to the size of fiber systems. And they would have to do all of this without getting any additional revenue.

And rural folks would just be left out. All of the millions of homes that are being upgraded to 10 Mbps download by the Connect America Fund (and the tens of millions of other ones already with slow DSL) would be shut out in a world where most video was on the web rather than on the cable systems. I wonder if the politicians could ignore a rural TV gap in the same manner that they ignore the rural broadband gap?