Comcast, You Can Thank Netflix for the Win

(Bloomberg Opinion) -- Comcast, grit your teeth and say, “Thank you, Netflix.”

With the media industry so fixated on the cord-cutting trend and the shift to streaming, a simple point that often gets overlooked is that new streaming services require a good internet connection. And who sells those internet connections? Cable providers such as Comcast Corp. That means the same old cable giants whose steep monthly bills had consumers fed up and flocking to cheaper TV-entertainment options are actually still benefiting from the rise of streaming. That also buys Comcast time to figure out how to build its own Netflix-like service.

While Comcast’s base of cable-TV subscribers shrank again in 2018, its number of broadband users rapidly increased, according to year-end results posted Wednesday morning. The company added 1.35 million high-speed internet customers, and almost all of them were residential users, as more people watch TV and movies online from their couches. The signups helped Comcast’s profit beat analysts’ expectations.

Comcast, You Can Thank Netflix for the Win

Comcast is also experiencing a surge in single-product customers, as it loses triple- and quad-play bundle subscribers. Kagan, a unit of S&P Global Intelligence, predicts that broadband-only homes will make up a third of all U.S. households by 2023. Comcast, along with its rivals, plans to raise prices on pay-TV services this year, almost daring people to quit and switch to Netflix, Hulu, YouTube TV, etc. – or some combination of streaming apps. The goal is to make as much money off its cable holdouts as it can, while embracing broadband as the new core of its cable business.

Comcast, You Can Thank Netflix for the Win
Comcast and its NBC Universal unit are late to the streaming wars in terms of introducing their own Netflix competitor, which AT&T Inc. and Walt Disney Co. both plan to do this year. Comcast said its version will launch in 2020, but even then early talk of the product signals that it isn’t ready to go all in on streaming. It will be an ad-supported service that’s “free” for Comcast cable customers, and in that sense it doesn’t sound much different than what used to be known as TV Everywhere (a way to use your cable credentials to watch TV from other devices). The product will also have an ad-free version available for a charge that can be purchased by non-Comcast customers. 

In the meantime, Comcast’s broadband growth – even if it starts to slow – brings comfort to investors, as the company works in the background on its nebulous streaming strategy and plans for Sky Plc, the U.K. satellite-TV business it acquired last year. Broadband isn’t sexy, but it sure is lucrative in the age of Netflix.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.

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