Market Insight

Comcast Launches Stream to Defend Position, Not Change the Market

July 16, 2015  | Subscribers Only


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Comcast, the largest pay TV operator in the US, is set to offer a low cost, ‘streaming cable’ pay TV service. The $15 per month service, Stream, will only be available to Comcast’s internet customers as the service uses the managed-IP part of Comcast’s cable infrastructure to deliver video, and not the open internet. This means that Stream is not, strictly speaking, an ‘over the top’ (OTT) service as the core of the offer is not delivered over the open network.

At launch the service will support smartphones, tablets and PC viewing, but will not be available directly on connected set top boxes (e.g. Roku, Apple TV) or connected TV platforms Stream will include live TV from HBO – the only premium channel included – and broadcast networks ABC, CBS, Fox, NBC, Telemundo, Univision, CW, and PBS. . But does not currently have cable channels such as ESPN, AMC, and TNT available.

Subscribers will have access to 20 hours of Cloud-based DVR, Comcast’s SVoD service Streampix, on Demand access, and TV Everywhere authentication rights for included networks. Cloud DVR and authenticated TV Everywhere apps from third parties, such as HBO Go, can be accessed outside the home.

Stream will launch in a beta test form at the end of summer 2015 in Boston before entering Chicago and Seattle, with Comcast’s entire footprint planned to be covered by early 2016.

Our analysis

With the launch of Stream, Comcast is acknowledging how much of a risk cord-cutters and cord-nevers pose to its video business and is taking another step to combat the problem. However, Stream is less appetizing than existing offers for several reasons; first, limited device availability, and by excluding the TV  Stream is limiting its addressable audience; and second, without comprehensive cable channel availability the new service is already at a disadvantage compared to Sling TV.

Comcast’s existing bundle that targets cord-cutters, Internet Plus, comes in a few speed tiers and combines internet, local channels, premium channel HBO, and TVE service HBO Go. At a base price of $44.99 for 12 months (Boston, MA), with a 25mbit/s internet connection, it may not seem competitive with Stream. However, with customers having to subscribe to the company's internet, a minimum of $34.99 (3 Mbit Economy Plus) for 12 months (Boston, MA), Stream is $5 a month more expensive and 22Mbit slower than Comcast’s own Internet Plus bundle.

It is tempting to think that for Stream to become truly competitive would require Comcast to open live TV to out-of-home viewing and also streaming across other ISPs. But it is not clear that this is the purpose the cable giant intends for its new service. The decision to use the managed-IP network and, as a result, limit availability, is a deliberate choice which suggests that Comcast is not particularly interested in using Stream as broad-based competitor to Sling TV or Playstation Vue. Comcast moving to directly compete with OTT pay TV services risks kick starting a period of competitive total war.

Instead, the implementation decisions Comcast has taken suggest that this initial version of Stream is better seen as a defensive move which simultaneously:

  1. Provides a low cost offer to its internet customers who may be looking at third party video services – the most obvious point of comparison is HBO Now which has the same price as the entire Stream bundle. However, it should also be seen in the context of Hulu’s subscription (formally called Hulu Plus) and CBS All Access, both of these broadcaster backed OTT services have a combined cost of $13.98 per month but lack Stream’s HBO access.
  2. Is intended to avoid cannibalizing the more traditional Internet Plus offer. In this context the decision to make Stream more expensive than Internet Plus makes sense, as the new service should not significantly detract from Comcast’s entry point to a traditional TV offer.

This defensive approach is reminiscent of Comcast’s initial Streampix deployment, which was intended as of a Netflix alternative aimed at Comcast TV and internet customers, instead of the pay TV SVoD package which uses that brand today. Streampix failed to catch on as a standalone package, in part because of a content mix that consumers frequently did not find compelling enough to warrant an incremental fee. By contrast, Stream might have got the content part right (i.e. offering more than HBO Now for the same price as HBO Now) but the lack of direct support for viewing content on the TV may prove to be a stumbling block this time. On paper, Stream is in a reasonably competitive position, in as the bundled TV Everywhere access to services like HBO Go should cover a reasonable share of the devices which consumers use to view online video. However, Comcast has a track record of restricting the devices which it’s authenticated TV Everywhere customers may use (e.g. no HBO Go on PlayStation 4) and this could serve to hobble Stream’s value proposition. Moreover the need to authenticate TV Everywhere apps introduces a layer of complexity that is simply not present for customers who pay for HBO Now and Hulu through iTunes, and this increased friction may also serve to deter customers from Comcast’s offer.

Geography
USA
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