As Comcast prepares to leverage its Flex system in a streaming platform joint venture with Charter, the cable giant is “extremely focused” on growing the base of U.S. operators who it licenses to, Comcast Cable CEO Dave Watson said Wednesday.
Speaking at MoffettNathanson's Media & Communications Summit, Watson said that innovation Comcast has built up on the platform will continue with Charter on board as a partner. And the company is very focused on being best in-class, particularly in terms of being an operator-friendly platform that others can turn to for a video solution as the traditional pay TV business continues to decline.
MoffettNathanson analysts noted that Comcast already licenses its X1 platform in Canada (where it licenses Flex to Rogers and Shaw. In the U.S. Flex is licensed as a hardware/software solution to Cox). They asked if investors should expect more operators to come into the platform partnership overtime.
“In the U.S. most certainly we’re going to be doing that,” Watson said. “We are extremely focused on growing the operators.”
He believes Comcast presents an ideal partner in terms of a turnkey technology solution to “provide an answer as more and more operators are focusing on connectivity and trying to figure out video.”
As part of the joint venture formed with Charter, Comcast is contributing Flex, retail (starting with Walmart where it is trialing distribution of its XClass smart TV, powered by the Flex operating system) and free ad-supported streaming service Xumo. Charter is kicking in $900 million over multiple years.
Comcast’s Xfinity Flex voice-controlled streaming device and platform is available to the operator’s broadband-only customers. But the platform from Charter and Comcast will be available to anyone, the companies have said. As of last August, Comcast had 3.8 million Flex devices deployed, and has continued to add streaming partners to the platform. YouTube TV launched on Flex in December, joining other virtual MVPDs including Sling TV and Hulu + Live TV.
Licensing to other operators is one avenue for Comcast’s streaming platform ambitions, but Watson cited multiple fronts it will be looking at. That includes working with additional retailers, as well as other smart TV OEMs to build the devices where Comcast can put in its software stack. With different avenues to pursue, Comcast is “so uniquely positioned for streaming,” Watson said.
“For us, we just want to compete against great platform operators and provide a great experience,” he said. “I think we can do it, and our focus will be in the U.S.”
Charter brings scale to compete in platform business
As for the joint venture with Charter, Watson said scale is the key element of the two cable companies joining forces.
It’s what’s really needed to compete in the platform business, he commented, be it in conversations with OEMs, retailers or content partners.
“You really do need scale, it needs to be uniform,” he continued, adding that it’s terrific to have Charter as a partner, with people in New York, LA and other areas Charter serves getting access to the platform in the not-so-distant future.
Charter is targeting 2023 to offer 4K streaming devices and voice remote from the JV effort.
Linear losses not abating
While touting innovation on its streaming video platform, Watson acknowledged that Comcast is going to continue losing video subscribers on the linear side of the business and doesn’t see that changing.
In the first quarter of 2022, Comcast lost 512,000 net traditional video subscribers. Charter managed to curb video losses more successfully, but still shed 112,000 customers in the first three months.
However, the company anticipated the changes in the ecosystem as more consumers transition to streaming video, and it doesn’t plan to lose money as it works to reimagine video, Watson said. He added that Comcast won’t “chase unprofitable video relationships.”
The company will still offer a linear video product for those that want it, including with its X1 platform, but he also pointed to the addition of Flex.
“At the same time, we’re adding Flex today, and the video attachment rate is not that far off – in terms of if you add up Flex and linear – from where we were pre-pandemic,” he said.
It’s still the early days for what he called a different kind of video experience, but Comcast is excited about a number of economic drivers that come with having its software stack in smart TVs at scale.
That includes transactional SVOD, selling content and participating on a revenue-sharing basis, and advertising, he noted.
“There’s lots that we’re going to be aggressively pursuing on that platform,” Watson continued. “So yes, there are tradeoffs happening in video, but the platform side I’m pretty excited about.”
Updated to reflect Flex is licensed to Canadian operators Shaw and Rogers, and U.S.-based operator Cox.