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Making Sense of Comcast’s Music Deal with Amazon

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Making pay-TV service more attractive

Comcast (CMCSA) has expanded the streaming media options for its television customers by adding Amazon’s (AMZN) digital music service to its Xfinity X1 platform. In addition to Amazon, Comcast has also partnered with Google (GOOG), Netflix (NFLX), and Sirius XM (SIRI) to bring their streaming video and music services to the X1 platform. Sirius is the parent of online music service Pandora.

Bringing streaming services to the X1 platform is a move Comcast hopes will help it kill two birds with one stone. Adding streaming services to the X1 platform is one of the ways Comcast is trying to make its pay-TV packages more attractive. The traditional pay-TV market in America is shrinking because of cord-cutting, forcing operators like Comcast to figure out new ways to improve their pay-TV subscriber retention.

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Cable operators leaning on broadband for growth

Besides enhancing the appeal of the pay-TV service, bringing streaming services to its X1 platform can also help Comcast stimulate uptake of its broadband service, thereby leading to more sales. As the traditional pay-TV market shrinks, cable companies like Comcast are increasingly leaning on their broadband businesses to drive revenue growth.

Comcast’s broadband revenue rose more than 10% YoY to $4.6 billion in the first quarter. Broadband was Comcast’s fastest-growing cable business in the first quarter. Broadband revenue rose 8.6% YoY at Charter Communications (CHTR) and nearly 11% YoY at Altice USA (ATUS) in the first quarter.

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