• Comcast Defies Cord Cutting in Q3 ’15, Losing Just 48K Video Subscribers

    Comcast continued to defy the cord-cutting boogeyman in Q3 1’5, losing just 48K video subscribers, compared with a loss of 81K in Q3 ’14 and a loss of 127K in Q3 ’13. Comcast said it was the best third quarter for video subscribers in 9 years.

    Once again, Comcast attributed the improvement mainly to its X1 set-top box, which is now in one-quarter of video homes and accounted for 60% of video connects in Q3. On its earnings call, Comcast noted X1 subscribers have lower churn, use VOD and DVR more heavily and subscribe to more additional outlets than non-X1 subscribers. As a result of X1’s success, Comcast has increased its deployment, now installing 40K X1s per day, compared with 30K per day in Q2. Comcast also said it has deployed 1.5 million voice remotes which further enhance the X1 experience.

    As VideoNuze readers know, I was one of the earliest X1 users, and was impressed immediately upon receiving it back in July, 2012. As I said then, X1’s key differentiators are its user interface, guide/search and responsiveness, which are on a par with any web or mobile experience. As Comcast has deepened the VOD library and added online video content via Watchable, the value of the elegant UI and web-like speed become more evident.

    For subscribers, quality comes at a price, as the rental for my X1 DVR is now $20 per month. That is clearly contributing to Comcast’s $143 per month ARPU reported for Q3 ’15 and steady cable margins in the face of programming cost increases.

    Comcast’s success with X1 and its improved video subscriber numbers stand in contrast with the weak video results reported by competitors like Verizon, AT&T/DirecTV and Dish. Comcast is demonstrating that a superior video product, combined with better customer service, can take market share and also deliver strong value for subscribers. In short, Comcast is finding a way to be an exception to the general cord-cutting doom and gloom that’s being pervasively reported.

    It’s also worth noting how important broadband is to Comcast, and how it opens up further optionality with X1. Comcast added 320K broadband subscribers in Q3, its best quarterly performance in 6 years. Because X1 can process IP streams, Comcast is able to tap into the huge trove of online video to deliver new services (as it has with Watchable). Eventually, I have to believe Comcast will integrate access to the big SVOD services, Netflix, Amazon and Hulu, which will be a huge differentiator and value driver for subscribers (Colin and I discussed in a July podcast).
    X1 also provides Comcast with a richer data stream about its subscribers’ video usage that the company is already combining with NBCU data to deliver more targeted advertising. The cohesiveness between Comcast and NBCU was highlighted on the earnings call as another new source of value. Linda Yaccarino, who runs all of advertising for the combined companies, also noted this differentiator yesterday at Hill Holliday’s TV Next conference where she spoke.

    Taken together, Comcast’s Q3 results continue to speak to the benefits of a modern, web-like set-top box, extensive on-demand content choices, robust broadband connectivity and cross-platform ad sales. Comcast is separating itself from the pay-TV pack and leveraging all of its assets to the fullest.