Comcast’s X1 platform
In Part 4 of this series, we learned about some of the challenges facing Comcast (CMCSA) with attracting and retaining video subscribers. According to Comcast, its X1 guide, or entertainment operating platform, is helping the company manage some of these challenges in the video segment.
Speaking about the benefits of X1 at the MoffettNathanson Media & Communications Summit held on May 13, 2015.Brian L. Roberts, Comcast’s CEO and chairman, said, “Our ARPU is higher, our churn is lower.”
Adoption of X1 still low among Comcast customers
As you can see in the above chart, Comcast’s triple-play customers, or triple-product customers, made up ~36.5% of its total subscriber base in 1Q15. According to the presentation delivered by Roberts at the MoffettNathanson Summit, the adoption rate of X1 among its triple-play customers is ~27%. Also, around one-fifth of Comcast customers use X1.
The company plans to increase the video platform’s adoption rate to more than 50% in the next two years. Currently, the product is available to the company’s triple-play customers, and work is underway to cover its double-play customers as well.
Higher adoption of X1 good for video average revenue and churn
Competition is intense in an evolving video distribution space. Telecommunication and OTT (over-the-top) companies are vying to attract and retain video subscribers with relatively new platforms and services. These companies include Verizon (VZ), AT&T (T), and Netflix (NFLX).
In such a competitive environment, X1 helps manage customer attrition. According to Comcast, the churn related to its triple-play services is ~30% lower with its X1 platform.
X1 customers also have higher ARPU (average revenue per user) than the company’s traditional platforms. One of the reasons for the higher ARPU is that XI users consume more of Comcast’s DVR (digital video recorder) and VOD (video-on-demand) services.
If you want diversified exposure to Comcast, consider the Consumer Discretionary Select Sector SPDR Fund (XLY). This ETF held a ~6.4% portfolio interest in the company as of April 30, 2015.