X1: Comcast’s compelling product
On January 25, 2016, Multichannel News reported that Comcast’s (CMCSA) Xfinity on Demand, the company’s VOD (video-on-demand) service, had a record “1.29 million people watching concurrently” on January 23. This number exceeded the record “set during last year’s Watchathon,” which was a VOD binge-watching event held by the company last year.
Comcast has made many changes to its X1 platform, including enhancing its sports app, launching a voice remote, and offering its Kids Zone.
Comcast expects a strong fourth quarter when it comes to video subscribers for its Cable Communications business. Comcast ended 3Q15 with X1 deployment penetration at 25% of its Cable Communications business video base. Comcast expects X1 deployment to come in at around 30% penetration by the end of 2015 and to continue in 2016.
Comcast believes that even if its revenues from high-speed Internet are growing steadily, the high-speed Internet market has relatively low penetration.
Historically, Comcast has always priced its service based on speed, but it has started experimenting with usage-based pricing. The company is experimenting with this because it believes that 10% of its high-speed Internet clients use 50% of its high-speed Internet network capacity. It views usage-based pricing as a way to compensate for the company’s investments in technology to improve its network.
Comcast is also planning to deploy DOCSIS 3.1 technology in early 2016. It expects its Gigabit Pro service will have reached 18 million households by the end of 2015.
Comcast is facing increasing competition in the high-speed Internet market. This competition is not only from telecom players such as AT&T’s (T) U-verse service and Verizon Communications’ (VZ) FiOS service, but also from a new entrant into the market, Alphabet’s (GOOG) Google Fiber.
Comcast continues to offer different products in its triple-play services (voice, video, and high-speed Internet) based on market segmentation. These include Stream, Watchable, and Xfinity on Campus.
Using market segmentation, Comcast can upgrade an existing customer to another product instead of losing the customer to its competitors. This suggests that market segmentation could result in the reduction of involuntary churn for Comcast, which could drive up the company’s ARPU (average revenue per user) for its Cable Communications business.
Comcast makes up 0.82% of the SPDR S&P 500 ETF (SPY). If you’re interested in exposure to the computers sector, SPY has 4% exposure to that space.