How Will Competitive Landscape in Media Industry Affect Comcast?
Comcast’s strategy of market segmentation
Millennials increasingly prefer to watch content online. This trend has allowed new players to enter the market and has made it difficult for pay-TV companies like Comcast (CMCSA) to retain their subscribers. Comcast was asked about how it intends to compete in the face of this changing landscape at the Morgan Stanley Technology, Media & Telecom Conference late last month.
Comcast stated that the key to getting ahead of the competition has been the company’s strategy to offer products based on market segmentation. For example, Comcast’s Internet Plus plan is for Millennials who are not very interested in streaming videos but would like high-speed Internet.
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By offering different products among Comcast’s Triple-Play services, Comcast is catering to Millennials who want a different type of content and who tend to be heavy video viewers. Offering different products means Comcast can upgrade an existing customer instead of losing the customer to its competitors. Market segmentation could result in the reduction of involuntary churn for Comcast, which could drive up the company’s average revenue per user for its cable communications business.
Integration of content on X1
Comcast further stated that with the integration of Alphabet’s (GOOG) YouTube and Netflix (NFLX) on its X1 set-top box, its X1 set-top box has also been a content aggregator. The company also pointed out that with its X1 set-top box, the company is changing the way viewers watch content with the integration of streaming services, traditional pay-TV, and On Demand content.
Comcast said that around 30% of its X1 customers are viewing Netflix through X1. The company also noted that in January, it had observed an uptick in the viewing of On Demand content by over 35% year-over-year.
The company also stated that with the X1 set-top box, it’s not only upselling Netflix and YouTube but driving up the demand for its content and gaining new video subscribers in the process. As the above chart indicates, Comcast had 22.5 million video customers at the end of fiscal 4Q16.
Comcast makes up 0.82% of the SPDR S&P 500 ETF (SPY). SPY invests 3.4% of its holdings in the computer sector.