Bucking a trend amplified by a small but growing cord-cutting trend and the popularity of over-the-top video options, Comcast just came off first quarter in which the MSO added 53,000 subs, its best Q1 video result in nine years.
A sizable portion of the credit goes to X1, Comcast’s IP-capable next-gen video offering, but, according to Matt Strauss, Comcast Cable’s executive vice president and general manager, video services, the results are due to a confluence of efforts and initiatives that span not just the core product but also areas such as improved customer care.
Multichannel News technology editor and Next TV editor Jeff Baumgartner recently caught up with Strauss to discuss Comcast’s ever-expanding video strategy, including X1, usage trends for mobile and TV everywhere applications, what’s next for the operator’s IP-delivered “Stream” product, some hints at the MSO’s ambitious plans for the Rio Games, and how Comcast is positioning itself as consumers continue to adopt new TVs that are capable of supporting 4K video and high dynamic range (HDR) formats.
The following edited transcript ran in two parts earlier in the week in Multichannel News dailies distributed at the INTX show in Boston.
Multichannel News: As you look at the second half of the year, what are your top priorities?
Matt Strauss: We're really focused first and foremost on continuing to execute against the deployment of X1. We're seeing a lot of very positive benefits from X1, both on the churn and on the increased consumption side. We're now at about 35% penetrated, and it's even higher if you just look at triple-play subs -- about 50% of our triple-play subs now have X1.
What goes hand-in-hand with that is that we also want to finish out the deployment of our cloud infrastructure. We've been deploying cloud across our footprint -- both cloud streaming and cloud DVR – and we are very close to getting 100% deployment. We want to finish that up by the middle-to-end of this year.
Finally, we want to continue the penetration and usage of our products and services. We’ve got a very ambitious deployment for our new consolidated Xfinity app. With the upcoming Olympics [in Rio] we want to use that as an opportunity to shine a light on this new application, which we think is a tremendous value to our customers.
MCN: For X1, you've been deploying about 40,000 boxes a day. Is that a comfortable clip for you or are you looking to push the needle even harder?
MS: I think there are always opportunities where we want to accelerate. But at the same time, there's a bit of a cadence where we've gotten into where we want to make it easier for customers to get access to X1, which includes self-install kits. But there are segments that prefer a professional install.
I think we're at the right pace and speed based on what we're forecasting. We're installing between 40,000 to 50,000 [X1] boxes per day. At that run-rate, our goal is to get close to 50% by the end of this year.
MCN: With respect to the pay TV momentum, how much credit does X1 get, even as you continue to improve other areas like customer care and customer experience?
MS: It certainly is contributing. When you look at X1, we're seeing improvements in churn. X1 customers are also consuming more video. They also have a higher attachment rate to DVRs and typically they take additional outlets in their home. There's no doubt that X1 is contributing, but I don't know if there's any one silver bullet.
When it comes to growing the video business, it's really a combination of several factors and investments that we've been making over the past few years, both in how we've been improving our infrastructure, moving more to IP.
We're also equally focusing on reducing call volume. We've had some of the lowest agent call-in rates in years. We've taken more than 11 million calls out of the system.
MCN: How is X1 impacting viewing habits? Comcast has talked about the impact on VOD usage, but how is it affecting viewing of live, linear TV?
With X1, we're now seeing 85% usage of on-demand among X1 subs. That equals about 25 hours of on demand consumption per month. We've expanded the number of series that are stacked where you can get access to all the episodes in a season. We went from a few series a few years ago to now over 700 series that we offer fully stacked.
When you incorporate this seemingly infinite amount of content and ultimate control and you also marry in with this recommendations and voice navigation and a level of personalization, we actually have seen an increase across the board in video consumption -- live, on demand and DVR.
When you track an X1 households from a year ago to 2015 to 2016 we've seen an increase of over 3% in total video consumption on average across the board.
When you marry together those things together with choice and control, we're seeing a lift. That doesn't mean that viewing habits aren't changing and shifting. But we think X1 is becoming in many ways a better mousetrap.
MCN: What kind of usage patterns are you seeing with the Xfinity TV app? Is the big challenge getting the message out to customers so they understand the app's full capability?
MS: I'd almost characterize it as we're in a moment in time because we have the Xfinity TV in-home app and we have our Xfinity TV Go app. We are in the process of consolidating those into just one app, which will be the Xfinity TV app. This unification…will provide this unprecedented access to content both in the home and out of the home. And I think those lines are going to continue to get more and more blurred.
When you look at the usage of our app in general, we have about 42% penetration of our mobile app among our double-play customers on a monthly basis. On a quarterly basis, it's almost 60% who are using one of our apps, and that's up about 16% year-over-year.
MCN: How far along are you with this app unification plan?
MS: If you download the Xfinity TV app today, we've already started. We've already incorporated all of the TV Everywhere content and the in-home content into the app. It's primarily been targeted at X1 customers. For the Rio Olympics this summer you'll see a much more concerted effort to increase awareness around the availability of that app to the broader base.
MCN: What's next for Comcast with respect to 4K? You've got the app for Samsung TVs but we've seen some recent reports that you'll really be focusing more on a strategy that puts an emphasis on High Dynamic Range (HDR)?
MS: We are highly focused on ensuring we're delivering the best video quality. The realty is we're at the very early stages of 4K. There's arguably more marketing and messaging going on around 4K than actual content and choice.
When we evaluated this -- while there's hyper-attention on 4K, when we look at the total video experience, we think 4K is part of the offering. But HDR, which is not necessarily getting the same amount of attention, is in many ways more immersive and, we think, impactful.
When you marry that with Dolby Atmos [an immersive three-dimensional audio platform], it's the combination of 4K, HDR and sound that we think is really the right combination of transcending to an almost Ultra HD experience. That's what we determined was the right experience and focus that we want to lean into.
Instead of deploying maybe a half-baked solution, which we're starting to see a little bit of in the market, we thought it was more prudent to deliver the complete experience... and that's what's being developed with our Xi6 box, which we'll be testing this year, but it's going to really be deployed next year.
We will be experimenting with the Olympics with 4K. There's going to be a couple of hours a day of 4K content that we will be delivering. We're also sponsoring the opening ceremonies in 4K, but we're also shooting it in HDR with Dolby Atmos sound. [Note: Comcast showed off the wireless, HDR-capable Xi5 box at INTX, and plans to start shipping it on July 4. A 4K-capable HDR box, the Xi6, is also in the works].
MCN: The video market continues to be abuzz about skinny TV bundles. Comcast has been going after that segment with the Stream TV product in some select markets. What have you learned so far and what's next on the rollout plan?
MS: In many ways X1, we think, is satisfying the demand for how many of watch television. The average person watches about 130 hours of video every month.
But there are changes in how other segments are consuming video. When we look at skinny bundles, we believe that they are in some ways a manifestation of the economy as anything else. It's rare that you hear someone say that they want fewer choices. What’s more likely is that you might hear someone say they want to pay less.
We have been experimenting with skinny bundles and experimenting with ensuring we're getting the right product to the right customer at the right time in their life, whether that's Internet Plus or the Xfinity On Campus product, or Stream.
Stream, though, in many ways is not really just about a skinny bundle. In many respects, it's us looking at new ways at how we market, how we activate a video subscription, and, for instance, if you're a high-speed data customer and you are in one of the markets where we've deployed Stream you can instantly add Stream. It doesn’t' require a truck roll, it doesn’t require additional equipment. We're able to instantly activate it for you.
Stream has a different buy flow. You can cancel it at any time. You can use a credit card. The care is primarily self-help.
MCN: So, it's designed to be low friction.
MS: While Stream is, at the moment, comprised of a skinny bundle, the strategies behind Stream is much more around how we're going to transform the overall end-to-end customer experience, and Stream is just one example of how we are expanding into that terrain.
You will not only see us deploy Stream into additional markets, but we'll also evolve the Stream product which will include additional tiers of content and you'll also see us expand streams to additional platforms.
It was initially launched for mobile and Web, but we've always known that access to the TV is going to be critical. [On April 20], we announced a deal with Roku. As part of that you will see us enabling Stream and other parts of our video subscription onto Internet-connected TV devices.
It would be a mistake to think of Stream as a skinny bundle. It's much more comprehensive strategy in how we're looking to evolve that over time.
MCN: Let's talk a bit about the results you’ve seen with electronic-sell through, which you launched in 2013. Also, Fandango (part of NBCUniversal) just bought M-Go and rebranded that EST service as FandangoNow. Do you see some opportunities for Comcast to align its EST product with that?
MS: Since we've launched electronic sell-through, we've had over 5 million customers make digital purchases and it has also unlocked the ability for us to access content in earlier windows. It's not uncommon for studios to release movies digitally, in some cases, three or four weeks before physical. It's given us the ability to market to those customers in advance of some other distributor's that have not launched electronic sell-through.
We continue to refine the product; we're introducing bundling and pre-buys. You'll see us test different ways to add value. For example, we're testing these enhanced content offerings that when you purchase movie digitally it unlocks companion experiences. And we're looking at gaming as another way that we can add more value to digital purchases. We're working closely with the studios to continue to find ways to evolve the product and look at ways to [support ] earlier windows.
There certainly may be opportunities where we collaborate at some point [with Fandango], but my sense is that Fandango is interested in exploring ways to expand and enhance their ticketing business and electronic sell-through may provide new models for them like super tickets. That has not been as high a priority for us.
Who knows? There could be some shared learnings that allow us to find ways where we could better work together.
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