Comcast launches Streampix: Are MSOs taking an over the top approach to reduce churn & grow revenue?

Comcast, the largest MSO in the U.S., has announced the launch of its OTT streaming video service, Streampix. This launch is not surprising as innovative MSOs have been working with OTT multiscreen video technology throughout 2011 (see here). One of the more interesting aspects of this service is the content rights component.  The way that they have been negotiated appears to be a clear signal that MSOs are beginning to view OTT video services as a way to increase market share and not just as a customer loyalty/churn reduction strategy.

Streampix will initially be available only to Comcast’s 22 million subscribers. The service is positioned as an additional tributary (the other one being Xfinity On Demand) feeding the TV Everywhere concept pioneered by Comcast/Time Warner in 2009. However, the carefully negotiated content rights may indicate grander national plans.

Streampix: The service will be available at no additional charge to the approximately 8 million triple-play Comcast subscribers. Comcast cable-only subscribers will be charged $4.99/month. The Streampix service will compliment the strong Xfinity on-demand offering, according to Marcien Jenckes, VP of Video Services. Both the Wall Street Journal and the LA Times reported that Comcast has the content rights to offer Streampix to a nationwide audience, but for now the service is only available to its current subscribers.

What does Streampix indicate to other MVPDs?

The launch of this OTT multiscreen service by Comcast is a demonstration of its view that multiscreen service can stymie churn, and perhaps even provide a lift in ARPU. This point of view is in line with Neil Smit’s discussion about the contribution of Xfinity On Demand to Comcast cable business during the Q4 earnings call on Feb. 15. Based on the negotiated content rights, the big implication appears to be that large MSOs are beginning to see OTT video services as a future channel to grow their customer base. Given the complexity and high cost of negotiating content rights for a national audience, it is unlikely that Comcast would have done so unless it was planning to expand the service in the future to attract new customers outside its current footprint.

Recent statistics show that there is growing consumer appetite for OTT video devices. In the U.S., 13% of broadband homes have OTT DVRs, tablet penetration is at 11% and smartphone penetration is at 31%. Given these indications and the Streampix launch by Comcast, MSOs and IPTV providers should launch their own OTT multiscreen video services to proactively protect their customer base.