Is the Comcast Lion Finally Set to Roar in Online Video?

Oct.26.10 | About: Comcast Corporation (CMCSA)

On Monday, Comcast (NASDAQ:CMCSA) announced that it has taken the "beta" label off its Xfinity TV ("XFTV" as I call it) premium online video service and opened it up to all video subscribers (dropping the requirement that XFTV users need to also be Comcast broadband subscribers). Comcast also unveiled new remote DVR scheduling and search/personalization features, and touted that it now offers 150,000 content "choices" in XFTV.

Though none of yesterday's individual moves are that significant in and of themselves, after chatting with a spokesperson at Comcast and talking with others in the industry, I think what matters more is that Comcast is signaling the start of an aggressive push into online video distribution. That's worth noting because with NBCU's assets soon to be under its roof, a newfound assertiveness in online video could have profound implications in the video ecosystem. Here are a handful of potential items to watch for:

TV Everywhere rollouts and cable content availability - Yesterday's announcement highlighting 150,000 content choices somewhat obscures the most important value of TV Everywhere-type services: bringing cable TV programs online. For obvious reasons a lot of these shows are unavailable for free online today. By the time you subtract premium network shows (e.g. HBO, Showtime, Starz), content gained from its partnership with Hulu and and short clips, the actual amount of cable content in XFTV that's not available elsewhere is still relatively slim. But that is certainly going to change as Comcast asserts itself. Comcast spends more on Hollywood content than anyone else and it will demand and get expanded online distribution rights, putting the squeeze on anyone else trying to do the same.

Hulu's fate - With Comcast owning NBCU, it will become one of the equal owners of Hulu. As a result, Hulu's strategy - and possibly even its viability - will be revisited. As I've said before, it's hard to imagine Comcast silently standing by why Hulu plugs its own subscription service, Hulu Plus. Given its paucity of content, Hulu Plus certainly isn't a cord-cutting threat to Comcast, but it is an annoying distraction from Comcast's goal of keeping consumer spending focused solely on subscription cable. Even Hulu's free service could be a burr under Comcast's saddle as it looks to debunk consumer expectations of free high-quality content access.

ISP data cap and Netflix - In addition to being the biggest video provider, Comcast is also the biggest broadband ISP. With the astounding growth of Netflix's streaming this year, Comcast must be closely reviewing its strategy around bandwidth and monthly data consumption policy, which is generously capped at 250GB today. Comcast and other broadband ISPs will rightfully seek to capture upside from the big shift to streaming by introducing tiers (as the wireless carriers are already doing) and revising caps.

Retransmission consent - The hot button of the moment given the ongoing Fox-Cablevision dispute, Comcast, by its size, is in a position to influence the tenor of future retrans negotiations. Recently it singed a broad pact with CBS. An open issue is whether retrans deals like these will eventually mandate the removal of freely accessible programs on network web sites and Hulu (see above). If anyone has the size to force this it would be Comcast.

Sports - NBC's sports platform plus Comcast's own assets in channels like Versus and regional sports networks sets up Comcast to play a much larger role in national sports coverage. As sports leagues (e.g. MLB, NBA) are waking up to the value of streaming, Comcast could play a big role in shaping what comes online and what doesn't.

Multiplatform functionality - With the advent of Google TV and other connected devices, the bar is being raised for Comcast and other pay-TV operators to add Internet functionality to their experiences. Whereas smaller operators may be tempted to partner with Google TV, Comcast has the resources to go it alone. The XFTV features announced yesterday are a hint at the multi-platform benefits Comcast has planned. We should start hearing about these next year.

Wireless/device delivery - Comcast is an investor in Clearwire the independent 4G wireless broadband ISP. As both smartphones and increasingly, tablets (e.g. iPad) gain in popularity, extending traditional TV experiences to mobile will be key. If Comcast expanded on it current Clearwire bundling to provide on-the-go video viewing, that could be a new source of differentiation.

No doubt there are other things to look for as well, but that's a pretty comprehensive list. Though Comcast - and other cable operators - are under intense competitive pressure from other pay-TV operators like telcos and satellite, with the NBCU assets under its roof, Comcast is in an unparalleled position to capitalize on online/mobile consumer shifts. How exactly they'll do this is TBD, but very much worth watching.

Disclosure: No Positions