Drew Angerer | Getty Images
It’s easy to ignore last week’s announcement that Comcast and Charter have started a joint venture to gain market share across the country in live video distribution. But the two largest cable companies in the United States may be playing a long game that could usher in a new chapter in the streaming wars.
Comcast and Charter said they have developed a 50/50 project to push Comcast’s Flex streaming platform into more homes across America. Comcast will license Flex to Charter, giving Charter’s Spectrum subscribers access to the fore. Comcast will also contribute its smart TV business (XClass) and ad-supported streaming service Xumo to the project
Charter, in turn, will make an initial contribution of $900 million to fund expenditures and expansion. Additionally, Charter will make Flex-powered devices and voice-controlled remote controllers available, starting in 2023. And while Flex isn’t a new product, the partnership nearly doubles the potential device installation footprint.
On the surface, it appears Comcast and Charter started this partnership too late. Roku, Amazon, Apple, and Google have been making streaming hardware and software bundles for more than a decade. Samsung Smart TVs come with their own built-in streaming platform. What’s more, Netflix’s revelation last week that it was losing customers for the first time in more than a decade suggests that streaming subscribers may have peaked in the US, at least for now.
“It’s hard for you to imagine how they would succeed given the number of years we’ve invested in our platform as well as our competitors,” Roku CEO and Founder Anthony Wood said of the Comcast-Charter project. during a conference call regarding his company’s earnings on Thursday.
Wood added that it has historically been difficult for companies to compete with Roku on broadcast distribution because competitors like Comcast and Charter have sprawling businesses, while streaming is Roku’s sole focus. Roku ranks first in the streaming market share for large-screen devices, according to research firm Conviva, followed by Amazon Fire TV and Samsung.
However, Comcast and Charter have a huge advantage that no other live-streaming competitor – technicians entering the house.
Court main feature
Almost every person or family that moves into a new home or apartment needs a home broadband setup. Comcast and Charter is the largest high-speed home broadband connector in the country.
Hundreds of millions of American households already use a streaming device and may not feel like switching. But Comcast and Charter serve more than 200 million American families combined. Comcast CEO Brian Roberts and Charter CEO Tom Rutledge could team up on a strategy to tell their broadband technicians to connect Flex devices when they connect homes across the country to the Internet.
Currently, Comcast and Charter don’t have many consumer perks to market with Flex. Businesses can market the user interface, but it’s hard to sell consumers something they may not have seen before. Comcast’s voice-controlled remote makes it easy to find content among a range of streaming services, but Roku and Amazon have voice-controlled remotes, too.
In other words, there aren’t many obvious reasons why someone would use Flex on any device that a consumer already owns. But TVs and streaming devices are finally getting old. FlexBox, at least for now, is free for new broadband subscribers.
If any industry knows the video distribution business, it’s cable.
Executives at smaller media and entertainment companies said privately that they were surprised that the live-streaming packages didn’t actually pay off.
“I don’t see much motivation to do that,” Netflix co-CEO Reed Hastings told CNBC in 2020, when the company’s market valuation was more than double what it is today. “It might be nice to try that in some countries, but it’s not a big area for us.”
The recent drop in Netflix’s share and direction of an acceleration in customer losses in the next quarter could be a catalyst for packet streaming — a product that begins to resemble a smaller version of the cable bundle.
If Netflix agrees to sell a bundled product—say, purely hypothetically, with Starz, Peacock, and Paramount+—for a total discount, the third-party distributor would need to sell that bundle and authenticate the bundle’s buyer.
Apple, Roku, Google, and Amazon can all be a third-party collector.
But the “OG” video distributors are Comcast and Charter — the cable companies. Selling batches of video content has always been their business.
Now they are trying to put transmitters in the homes of millions of Americans. It’s not a huge leap to assume that they want to sell a bunch of video subscriptions to customers to go along with installing these funds.
“Not only will we make these products available to millions more customers, but we will open the door to entirely new revenue opportunities,” Roberts said during the Comcast earnings conference call last week.
Routledge added during the charter earnings conference call that it’s only a matter of time before nearly all of the company’s customers get streaming video instead of cable TV.
“I expect most of our customer base will be all progressively [Internet protocol],” He said.
This will not happen overnight. But it does make more sense for Comcast and Charter’s JV’s play. They’re playing the long-running game of Wars streaming – and they hope the end result will look a lot like Cable TV 2.0.
Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.
WATCH: Comcast’s first-quarter earnings results