Comcast 'hedging its bets' with upcoming streaming service, analyst says

Comcast
Comcast/NBCUniversal's ad-supported streaming service is launching in 2020. (Comcast)

Comcast this week finally announced plans for a direct-to-consumer streaming service, and according to analyst firm MoffettNathanson, the company is "hedging its bets.”

Comcast-owned NBCUniversal’s ad-supported streaming service will draw on NBCU’s content library along with licensed content and original programming. It will run on top of Comcast and Sky’s technology platforms and will be made available at no cost to NBCUniversal’s pay TV subscribers in the U.S. and international markets. Comcast Cable and Sky will provide the service to their combined 52 million subscribers.

NBCU said it will sell an ad-free version of the service as well, but it did not disclose how much that option will cost. The company plans to sell subscription access to the service for non-pay TV customers. The company also said that it will continue licensing its content to other studios and platforms, though it plans to retain some of its TV shows and films for the platform.

That strategy is somewhat muddled. Hulu, which is 30% owned by Comcast, has already been successful with a hybrid subscription/ad-supported streaming service model, so it’s not completely outlandish. But as MoffettNathanson points out, Comcast’s use of a similar strategy amounts to “incrementalism.”

“Comcast, after all, has many masters to serve. They don’t want to blow up their traditional Cable TV business by giving their customers one more reason to jump ship. They don’t want to blow up their current distribution partners, robbing themselves of what is, after all, the dominant revenue stream for NBCU. And they don’t want to blow up their lucrative content licensing business, which has become an increasingly important contributor to NBCU economics,” MoffettNathanson wrote in a blog post.

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MoffettNathanson said AT&T and its WarnerMedia division is taking similarly cautious steps into OTT. The company is launching its own WarnerMedia SVOD later this year but is still licensing popular content such as “Friends” to Netflix, a primary competitor.

But Sky may be more of a sticking point within Comcast’s OTT strategy. MoffettNathanson said there’s a risk Sky’s proprietary licensing deals with content partners like Premier League, Disney and HBO won’t be renewed when they come due. At that point, Comcast would need to invest heavily in original content to keep Sky differentiated from competing European pay TV operators. The firm said that neither Comcast nor AT&T appear ready to funnel enough investment into original content to keep pace with Netflix or Disney.

“Does Comcast have the stomach for the kind of investments that will be required? Does AT&T? Only Disney seems to have the commitment to invest truly aggressively to transform itself into a direct-to-consumer model, even if that means sacrificing near term numbers in order to do it. Comcast (and AT&T) seem to be suggesting that either they won’t, or they won’t need to,” MoffettNathanson wrote.

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