Comcast and AT&T seem to have very different attitudes to their pay TV services. Xfinity X1 is still a big focus for the cable giant, while DirecTV Now is increasingly important as an add-on to wireless for AT&T. But does the introduction of Xfinity Instant TV signal a change for Comcast?
Chapter 1: Comcast’s Q2 2017 results (1:20)
Comcast turned in exceptional Q2 2017 with big revenue gains in all businesses. Video disappointed though. Revenue gains were strong, but subscriber gains were not. Over the past 4 years, Comcast has steadily narrowed the Q2 losses. This last quarter, those losses increased again. Does this show underlying weakness in the business? I think it does because pay TV prices at Comcast keep increasing much faster than inflation.
Will is still bullish on Xfinity TV, pointing out it is the only pay TV service that is showing net annual gains. While this is true, this quarter shows that there is still some weakness there.
Chapter 2: Xfinity Instant TV (11:00)
Taking square aim at the affordability of pay TV, Comcast continues to ready its new Instant TV service. This is a video product the company hopes will attract millennials who no longer see television as an essential service. In the conference call Brian Roberts, Comcast CEO, said that Instant TV would not require a set-top box and that it is on target for release later this year.
Reuters has previously reported that Instant TV will be available for around $15 a month and people will be able to subscribe on a month-to-month basis. Initially, it will only be offered to customers that take the company’s broadband, but not Xfinity TV.
Chapter 3: AT&T Q2 2017 results (14:40)
DirecTV lost 156K subscribers in Q2 ’17 versus a gain of 342K in Q2 ’16. U-verse also lost 195K subs in Q2 ’17 vs. a loss of 391K in Q2 ’16. However, AT&T is actively shifting U-verse subs to DirecTV as it shelves the U-verse TV platform. DTV Now added 152K subs Q2 ’17 and is the only bright spot among AT&T’s video offerings.
Will goes on to say that most of the new DirecTV Now subs are coming in wireless bundles. I think this is indicative of a fundamental shift in the business of pay TV. Until now SVOD services have acted as augmentations to the anchor pay TV service. Now, for some people, skinny bundles are acting as an augmentation of video services anchored by online content like Netflix.
Chapter 4: Downward pressure on content license fees? (20:30)
Will thinks this could end up putting downward pressure on the content license fees pay TV operators must pay. I disagreed. Comcast says they get slightly higher fees from the skinny providers. I think this is more likely to embolden content providers, as they feel like they have a realistic alternative to operators like Comcast online.