At the Cable Show yesterday, Comcast's CEO Brian Roberts showed off "X2," the latest generation of its cloud-based X1 entertainment platform. Beyond a slew of UI improvements, X2 offers at least three things that are very important and I believe, indicative of key future trends in video delivery: cloud-based DVR, an inexpensive IP set-top box and a unified cross-platform experience.
With DVR penetration around 50% of U.S. homes, the notion of recording and time-shifting programs (not to mention skipping the ads) is now a widely accepted behavior. For some of the most popular shows on TV, more than half of their viewership is delayed viewing (for example, Showtime's CEO said earlier this week that 60-70% of "Dexter" viewers watch via VOD or DVR). The big constraint of DVRs has been that recorded content is "locked" to the DVR device itself and the amount of recording time is limited by the size of the device's hard drive.
All that changes with cloud-based DVR, which allows the Comcast subscriber to access DVR programming on multiple connected devices, wherever they are, dramatically increasing the value of the DVR feature. Liberating the programming from the device is something TiVo has done, not in the cloud, but via a clever companion player called TiVo Stream (Stream also offer downloading, which it seems X2 will allow as well). By moving storage to the cloud, Comcast gets new flexibility in how to price DVR services, potentially lowering the entry price for casual users, but also possibly charging a premium for power users.
Inexpensive IP set-top box
Roberts characterized the cloud as a "game-changer" for the company, and there's no bigger tangible example of this than with the set-top box. Roberts showed off a new "XI3" inexpensive IP set-top box that removes "most of the smarts" of the traditional box, moving them to the cloud. Though not a lot of detail was shared, Roberts said XI3 will be 4 times faster, 3 times smaller and 50% more power efficient than a traditional box. I'm betting it will feel very similar to a Roku.
This approach to set-tops is so important because it relieves Comcast of massive annual capex requirements, while streamlining operations and opening up new service opportunities. Cost was a key drawback of the company's expensive X1 box which I have. By reducing set-top capex, Comcast gives itself more flexibility in service provisioning, particularly for cost-conscious subscribers where amortizing a $300 box is hard to do and smaller programming bundles may be required. One can envision Comcast doing promotions where they give these new devices away to lure new subscribers. And because of cloud delivery, Comcast can deploy new services to them quickly. Note that Roberts did not mention OTT services like Netflix, Hulu Plus, YouTube, etc. yesterday, but if Comcast wanted to deliver them to XI3, it would be straightforward.
Unified cross-platform experiences
One of the biggest drawbacks of today's pay-TV experience is that it feels like an island in a sea of otherwise connected device experiences. I've written previously about the critical importance of an integrated TV experience and how I see this as a big opportunity for Apple - unifying the TV, mobile and desktop. Roberts stated in his keynote that "today's winners integrate across all devices and platforms with a common interface that make it easy and fun to use."
Bingo. That's exactly what X2 is looking to do. With X2, whether you're accessing service on the TV, tablet or smartphone, you'll see a common UI and branding, identical controls, similar content, etc. In short, Comcast fully recognizes that the TV is becoming just another screen; the viewer's experience with it must be seamless with other devices.
Comcast is promising X2 later this year and I'll be eager to give it a spin and see how the reality lives up to the vision. Based on what we heard yesterday, at least for Comcast subscribers, X2 looks like a major step forward and quite possibly a blueprint for the entire pay-TV industry going forward.