Why Comcast Believes X1 Could Boost Its Video Business

Comcast has bucked the subscriber loss trend with X1

According to a Chicago Tribune report on May 24, 2017, citing research firm MoffettNathanson, pay-TV providers in the United States (SPY) lost 762,000 subscribers in 1Q17, five times more than in 1Q16. However, Comcast (CMCSA) gained 42,000 video subscribers in 1Q17.

Comcast stated during its 1Q17 earnings call that its X1 set-top box had been the key product that resulted in video subscriber additions. Comcast has integrated its OTT (over-the-top) services like Netflix (NFLX) and Alphabet’s (GOOG) YouTube on its X1 set-top box. The company has not ruled out the integration of other services on its X1 set-top box.

Why Comcast Believes X1 Could Boost Its Video Business

Comcast has also licensed its X1 to Cox Communications and Shaw Communications (SJR). The popularity of X1 can be gauged from the fact that at the end of 1Q17, 52% of the company’s residential video customers use the device. In contrast, in 1Q16, the X1 set-top box had a 35% penetration rate.

Comcast expects that by the end of 2017, the X1 set-top box would have a penetration in the “low 60% range.”

Comcast’s video business in fiscal 1Q17

In 1Q17, Comcast’s video business had revenues of $5.8 billion, up 4.3% year-over-year. The growth in revenues was largely driven by the rise in residential customers, rate adjustments, and customers subscribing to multiple services besides video. The company gained 42,000 video customers in 1Q17. Of these, 32,000 customers were residential customers.

According to Comcast, ~71% of its residential customers subscribe to two or more products from its Triple-Play services (high-speed Internet, voice, and video). However, the company’s revenues from voice services declined 3.6% year-over-year to $863 million in 1Q17 as a result of fall in ARPU (average revenue per user).