Comcast’s agreement with Netflix
Comcast Cable is engaging in strategic initiatives to retain its existing triple-play customers and gain new ones. Comcast Cable’s video services have been a core growth driver for the company. According to Comcast, the video and high-speed Internet churn have improved for 26 consecutive months. It’s highly likely that Comcast will report another improvement in churn when it announces its 2Q16 earnings. In the last quarter, Comcast added 53,000 net video customers, which was its best result in nine years.
Early this month, the Wall Street Journal reported that Comcast (CMCSA) and Netflix (NFLX) have entered into an agreement to provide Netflix on Comcast’s X1 set-top boxes. Netflix is expected to become available on Comcast’s X1 set-top boxes later this year.
X1 is Comcast’s video on demand platform. It offers search and personalized recommendations through Comcast’s cloud computing infrastructure. In fiscal 1Q16, Comcast’s X1 set-top box had a penetration of 35%. Comcast expects the penetration of its X1 set-top box to be around 50% by the end of 2016. Comcast expects its X1 penetration to be deeper in 2017, although not 100%.
The core growth drivers of Comcast’s performance in fiscal 1Q16 were its high-speed Internet and video services and its rapidly growing Business Services segment. Comcast Cable generated 65% of the company’s revenues and 77% of Comcast’s OIBDA (operating income before depreciation and amortization) in 1Q16, as the above chart shows. Comcast operates its triple-play (voice, video, and high-speed Internet) services under the XFINITY brand.
The company is also pushing its triple-play services through multiple marketing channels. Early this year, Comcast began retailing its XFINITY Triple Play services through the Amazon (AMZN) Cable Store. This partnership with Amazon is another effort by Comcast to push its services and build its brand among customers.