Comcast Better Late Than Never to Connected-TV Market

Comcast Smart TV
Cheyne Gateley/VIP

MVPD and media giant Comcast is reportedly looking to enter the connected-TV market. Already a minor player in connected devices (think Roku, Amazon Fire TV, Apple TV, Chromecast) with the Comcast Flex, the firm is aiming to adapt the software behind its X1 cable box into a system to power smart TVs.

Frankly, it’s a surprise that it has taken this long for a set-top box (STB) manufacturer to look into powering smart TVs. When these Internet-connected TV sets began to appear on the market in 2010, it would have been an obvious move for a Comcast, TiVo or Dish to look into translating the interface from box to screen. But the companies opted to maximize their existing STBs versus investing in the future. 

Instead, the ground was ceded to manufacturers to develop their own operating systems and for Roku and Amazon to enter first the connected device market and then translate their popularity into powering connected TVs.

The late move by Comcast suggests the firm is finally waking up to both the possibilities that powering smart TVs bring and the realization that seeing their traditional customer shrink every quarter means they will need new revenue streams at some point.

Smart TVs and connected devices represent an ever-growing medium for consumers to deal directly with services in which they want to subscribe. This has been a boon to platform operators, ranging from Roku to Samsung to Apple, thatvtake a cut from any subscription via their device. 

In the case of services like HBO, Showtime and Starz, for which MVPDs used to have exclusive selling rights and now offer their content direct to consumers, this has led to MVPDs losing out on a share of subscription revenue where they used to have a monopoly. The number of subscription services available only via connected devices has mushroomed, meaning MVPDs are missing out on cuts from even more places.

This is likely one of the driving factors behind Comcast’s interest in the market. Another will be the growing consumer interest in AVOD and FAST services such as Tubi, Roku Channel and Pluto TV. These ad-supported services typically pass a cut of their ad revenue or inventory to the platform, much as MVPDs get some inventory across most TV networks they carry. 

With these looking to become entrenched distribution channels for some consumers, making sure to continue to generate ad revenue from these viewers is a motivating factor for Comcast. A third motivator will be the jailbreak that powering smart TVs represents for Comcast.

Cable MVPDs are subject to geographic restrictions and can only operate in predetermined places. While that gave somewhat of a local monopoly in the past, in a world where fewer and fewer consumers rate cable TV as a must-have, this restriction now effectively dooms cable companies to see revenues continue to shrink.

By powering smart TVs, Comcast would be able to break free of the shackles of an MVPD operation and instead be able to rake in revenue from regions it was never allowed to operate in (such as New York City and Los Angeles). 

Long term, it’s possible that Comcast smart TVs could reach a scale to provide strong income nationwide. The X1 set-top box is often feted as best in class; applying that to TVs could see consumers prefer the OS. 

On top of that, the acquisition of FAST service Xumo earlier this year may confer some advantages to Comcast. In addition to purchasing the FAST itself, Comcast also got hold of Xumo’s FAST channel packaging service, and it’s not hard to see a Comcast smart TV offering a unique set of channels based on this in-house ability, much as Samsung, LG and Vizio do currently. 

This also means a Comcast-powered TV in a Comcast service area may be able to offer cable channels built into the operating system of the TV set, simplifying the MVPD experience.

Of course, there are a lot of hurdles for Comcast to clear. First, it needs to find a TV manufacturer willing to switch to a new system. Then it needs time to break into the market and grow to a size before word of mouth can build. It may also be difficult to convince brand fans that they should break away from the smart-TV manufacturer to which they’ve grown loyal.

The opportunities available from such a move make it a gamble worth taking. In VIP’s opinion, it is a bold gamble but a necessary one to evolve Comcast’s core business outside of NBCUniversal to continue in the 21st century.