Comcast’s future: Thinking outside the set-top box; America’s largest cable company is becoming more like the firms it is battling against for the attention of couch potatoes

Comcast’s future: Thinking outside the set-top box; America’s largest cable company is becoming more like the firms it is battling against for the attention of couch potatoes

Dec 14th 2013 | NEW YORK | From the print edition


WHEN Comcast, America’s largest cable operator, took a stake in NBCUniversal (NBCU) in 2009, “30 Rock”, a popular NBCU comedy, wove the deal into its plot. The programme’s characters came under the thumb of a new corporate parent, “Kabletown”, which introduced innovations like moving customer services to a part of India with no phones in order to “provide the same level of service at zero cost”. Comcast employees can take a joke. Last month, at a gathering to celebrate Comcast’s 50th anniversary, they showed a clip of the show, to the amusement of the firm’s real employees.A sense of humour is a sign of confidence. Thanks to the $28 billion it spent to acquire NBCU, Comcast is the world’s largest media firm, with a market capitalisation of around $128 billion. NBCU gave Comcast control of a range of new “content”, including broadcast and cable networks, a Hollywood studio and a theme-park business. Comcast is also America’s most powerful media business, because it controls what people watch and the pipes that deliver it. In its efforts to retain that position it is having to adapt to the new ways that people want to watch TV and consume entertainment that smaller rivals are pioneering.


The cable business has changed dramatically since Ralph Roberts purchased a small cable system in Mississippi in 1963. Today his son, Brian, runs a firm operating in a vast and mature business; nearly 86% of American households subscribe to pay-TV. This has forced Comcast and other cable firms to increase revenues by raising prices (see chart) rather than by chasing new viewers. But not every viewer will tolerate high prices. The proportion of households with pay-TV has fallen slightly since 2010 as some have “cut the cord”. Comcast now has 21.6m subscribers, 1.6% fewer than a year ago.

As well as cord-cutters Comcast and other cable providers must defend their turf from a pack of new entrants. These include telecoms firms such as Verizon and AT&T, which offer pay-TV and fast broadband, and firms that stream video over the internet, such as Netflix and Amazon. These companies have not killed cable, but they have helped to shape the way people want to watch programmes: increasingly, on mobile devices and at a time of their choosing. Netflix is popular with the young. Around 20% of households headed by people under 25 do not have a television but watch programmes on other devices, such as laptops and tablets. If Netflix were a cable channel, its subscription revenues in 2013 would put it third in America behind ESPN and HBO, according to MoffettNathanson, a research firm.

Comcast has responded by trying to resemble the firms that could unseat it, offering more interactivity, personalisation and portability. “Television is going to change more in the next five years than it has in the last 50,” says Brian Roberts. Comcast executives talk about “apps” for the television and rolling out innovations every three to six months. The firm is paying particular attention to its user “interface”, or what, until recently, was called a TV guide. Comcast’s is now arranged not numerically by channel, but alphabetically by programme, by network and type of content. Couch potatoes even less inclined to effort can download an app to their iPhone and shout commands at it to locate shows.

Comcast’s new set-top box is “cloud-based”, adding to the potential for flexibility: films and programmes stored in the cloud can be watched on any device. It tracks viewing history and recommends programmes accordingly, much like Netflix. Comcast has made it easier for TV-watchers to find their way to full seasons of episodes that are available on-demand so people can “binge” on shows.

Other pay-TV providers are experimenting with new features, and some have approached Comcast to license its technology. One popular idea is “TV Everywhere”, which makes it possible for pay-TV subscribers to watch live and on-demand programmes on their mobile devices wherever they like. It has started slowly but is taking off as more content-owners agree to license the digital rights to their programmes. Tools like this may help Comcast and its rivals justify their high prices and convince people to stick with their television package.

Giving customers more products to keep them around for longer is an old tactic. Cable companies have long offered “bundles” of broadband, television and phone line. Comcast is going much further with its home-services business, which includes alarm systems, baby monitoring and temperature control. And it is bringing in partners. In October Comcast teamed up with Twitter to allow its subscribers to find or record programmes that are being tweeted about. Like its competitors it is also testing smaller, cheaper packages of television channels and broadband, to appeal to cost-conscious youngsters.

The greatest change for Comcast is the reorientation of its business towards broadband. By next year Comcast may well have more subscribers to its broadband services than for television. Those who eschew pay-TV will still need an internet package, and cable could pick up customers from satellite operators, whose internet speeds are slower. “Ironically content going to the internet gives cable companies that monopoly power back to a certain extent, because you don’t have competition in broadband to the extent you have it in video,” says Kannan Venkateshwar of Barclays, a bank. Comcast and other cable companies are experimenting more with “usage-based pricing”, charging more for heavy data consumption.

Mr Roberts has always had big ambitions and an appetite for deals. In 2004, two years after he became boss of Comcast, he launched an unsuccessful $66 billion hostile bid for Disney. The deal with NBCU pushed Comcast to a new level in size and clout, at a time when most media companies were slimming down to focus on what they did best. Time Warner, a content firm, has spun off Time Warner Cable (TWC); next year it will do the same with Time Inc, its magazines business.

The hunger games

Even Comcast’s few critics acknowledge that the firm secured an excellent price and favourable terms for NBCU. The rationale was that adding content would provide a hedge to Comcast’s core cable business. But few feel that there have been any significant benefits from content and distribution sharing a parent. “I would be just as happy if they had not bought NBCU,” says one Comcast shareholder.

He might be happier to hear rumours that Comcast has hired a bank to advise it on a possible bid for TWC, America’s second-biggest cable operator. This would give Comcast 34% of the American market. Scale can help cable firms compete with rival pay-TV services, and give more leverage in negotiations with content-providers, which continue to raise the cost of carrying their programmes. That’s why Liberty Media, a rival cable company, has its eye on TWC too. It has taken a stake in Charter, another cable operator keen to merge with TWC. Comcast is saying nothing about a deal, and some ask whether regulators would even allow it. “30 Rock” has already concluded its final season. Who will mock Comcast, if Kabletown becomes Kablecountry?

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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