Comcast’s Focus on the Internet a Blueprint for Other Operators

In early September 2019, Comcast held its first Xfinity Consumer Services Analyst Conference at its new Comcast Technology Center in Philadelphia, Pennsylvania. As Comcast has expanded and evolved since its early cable TV days it has outgrown its Comcast Center headquarters, leading to the construction of the Comcast Technology Center, which is now the tallest building in Philadelphia, dropping the Comcast Center down to number two. The two Comcast skyscrapers represent more than just growth, pointing to, as the moniker of the new building implies, technologies that underpin their content and services. At the conference, Comcast showcased its current and upcoming plans for Xfinity X1, a TV platform also used by other operators like Cox; Xfinity xFi, which manages connectivity/Wi-Fi; Xfinity Flex, an Over-the-Top (OTT) streaming product; Xfinity Home, a home security/smart home solution; and Xfinity Mobile, a Mobile Virtual Network Operator (MVNO) service. Central to Comcast’s strategy moving forward is the Internet and how these services and features are interconnected—not only with Comcast/Xfinity sourced solutions, but with those from third parties as well.

A couple of weeks later, on September 18, Comcast drove this point home further by announcing the availability of Xfinity Flex, which includes an Xfinity Flex box and Xfinity Voice Remote, to internet-only customers free of charge. On the surface, the Flex solution sounds like a typical OTT platform, much like a Roku or connected TV, but in practice it more closely resembles Android TV (with Google Assistant built in, albeit with a more curated app selection) and could potentially serve as a Trojan Horse to convert streaming first or cord-never households to more traditional pay TV offerings.

As the opportunity for traditional pay TV services continues to wane in the North American markets, it is preservation that has led operators to start embracing OTT services like Netflix as complementary to, instead of in competition with, their existing pay TV packages. Adding these OTT services has certainly added convenience (users don’t have to switch to different inputs or devices), but it hasn’t done much to move the needle away from cord-cutting. Comcast’s X1 platform modernizes the User Interface (UI) over more legacy solutions, which by today’s CTV standards are extremely dated, but most importantly serves as a centralized hub for managing and accessing Xfinity services/hardware and OTT content. Global content searches, for example (such as for movies that have a particular actor), will return options from all of the available services, as Comcast has access to the catalogs of many of the OTT providers to perform cross-platform searches. This isn’t the first implementation of these types of searches—at one time, Microsoft’s Xbox performed similar (albeit not as accurate or precise) global searches, but it likely arrived ahead of its time.

When Microsoft positioned the Xbox One as a centralized media hub, the OTT market was far less dynamic. Today, many households have three or more OTT subscriptions and, with the greatly increased investments in original programming, there is a significant amount of content to filter through. By acting as a centralized hub, Comcast and other pay TV services could fulfill a relatively unique roll, helping to bring some differentiation and added value. This is where Flex stands as an interesting proposition: by making Xfinity Flex free to all Internet-only subscribers, Comcast effectively introduces a channel to upsell these customers with linear programing and cloud DVR services down the road. Additionally, Flex uses a similar grid-style guide system as the X1 platform, which makes for a good UI, but perhaps more importantly it makes the transition to linear and more traditional pay TV services more seamless with an integrated UI.

Media content has quickly become more fragmented and disperse; the days when consumers knew what content to look forward to are long gone, changing with the progression from theatrical releases to home video to pay/broadcast TV. Today, many of the largest OTT players offer and continue to invest large sums of capital into original programming, which both creates an uneven release schedule and amplifies the difficulties of finding new content to consume. To address this fragmentation, cross-platform approaches are joining the ranks of standardization as a means to help codify these fragmented pieces and ultimately create synergies between services. Cross-platform does not solely apply to the media and entertainment markets but extends to other markets like smart home and Internet of Things (IoT) as well. As the complexities of these interactions increase, the need to reach deeper and more granular levels of personalization will grow in kind. To this end, companies like Comcast are already moving beyond simple searches across typical classes of metadata—for example, searches by genre, actors, or types of films. Gracenote/Nielsen is exploring multiple layers of more nuanced metadata, including emotions, while others like Vionlabs are using Machine Learning (ML) and Artificial Intelligence (AI) to create digital fingerprints of content that similarly enable much richer and deeper levels of search and recommendation, including recommending films that might span different genres but share other commonalities like including certain action sequences or eliciting similar emotions. Recommendations can also be more varied—for example, after completing a movie the viewer could be offered to watch titles that are similar and dissimilar (e.g., after a horror movie the user might not want to watch another horror film but prefer to watch a comedy).

There was a time when broadband providers worried they would simply become a generic data pipe for these services, which prompted some to invest in in-house OTT services and content, but operators like Comcast are showcasing how an operator can leverage their suite of technologies and role as a centralized hub. As new services come online, like cloud gaming, operators (both pay TV and mobile) will increasingly find value as the aggregator, rather than a closed walled garden. Operators will, and should continue to, offer in-house services, but remain open to third party opportunities as well. Video is only one facet of the larger whole and when you factor in other applications and opportunities (e.g., smart home, network management) the value of the aggregator or centralized hub grows in kind –this is why fears of serving as the main nexus point for a user’s Internet use is no longer warranted, in fact it is quickly becoming increasingly valuable to do so.

The shift to Direct to Consumer (DTC) is a prime example in which services like Netflix can no longer differentiate on video content aggregation alone—some content like Disney, NBCU, Warner Media, etc. will simply no longer be available. In this case Netflix’s focus on original programming will help it weather the storm as new services launch but creates further fragmentation within the video space. The same is happening in other markets as well as more companies look for ways to forge more direct relationships with their end users. This is where the value as an aggregator becomes critical, not only to help with content recommendations but also to create a more complete user experience that can engender synergies between services and platforms that would otherwise face a number of challenges. For example, a family that likes to have a Friday movie night might search online for takeout, search for a movie, ask their virtual assistant to dim the lights, and then turn off their mobile devices. An operator on the other hand can recommend a list of movies across a range of services, suggest food delivery options (and possibly facilitate the ordering process), and then, when prompted, set the viewing environment (e.g., dimming or turning off the lights, putting a hold on Internet connectivity to mobile devices to avoid disruptions, etc.). In effect the service becomes a critical tool for the household to use through many touchpoints, not just as a channel for video, broadband, home security, etc. alone or in silos. Serving as the centralized aggregation point also produces a wealth of cross-platform user information that historically has been difficult to collect—privacy issues are certainly of paramount importance, but with adherence to consumer-friendly practices the operator can become a trusted arbiter of this information, especially when this data is used in ways that bring value to the user.   

Ultimately, these interactions should lead to more personalized user experiences. While it might not be at the level of each individual household member, some viewing characteristics can be gleaned by analyzing overall user behavior. While privacy issues put a damper on how extensively this data could be used, it still needs to impact how future services and features adapt to each user/household and, by doing so, create enough value to increase switching costs and extract additional consumer surplus.