The growing cord-cutting trend looms large over the pay-TV industry. In fact, the shift to more internet streaming services has led some major pay-TV providers such as AT&T (NYSE:T) and Dish Network (NASDAQ:DISH) to meet consumers where they are with a linear TV streaming service of their own.
But one cable giant has yet to enter the streaming market. It hasn't had to, as it's actually been adding subscribers over the last couple of years. Comcast (NASDAQ:CMCSA), the nation's largest cable provider, has done an excellent job holding on to its customers recently, so investors have no reason to be nervous.
New competition is moving in
Comcast lost video subscribers for years after AT&T and Verizon (NYSE:VZ) started building out their IPTV infrastructure and promoting their new video services. The heavy promotions stopped a couple of years ago as AT&T and Verizon shifted their focuses and cord-cutting started impacting results; that's when Comcast started to win back customers.
Now Comcast has a new brand of competition to deal with. Over-the-top services such as Sling TV and DIRECTV NOW are able to offer their services nationwide. Unlike traditional pay-TV competitors, over-the-top services don't require any physical infrastructure.
Dish and AT&T have already launched their services. Hulu has a service in beta, and YouTube TV is coming soon. Verizon says it expects to launch its own service by the end of the year, and several other television streaming services exist as well. All told, the influx of competition is at a level unlike anything Comcast has ever seen before.
Nonetheless, people -- for the most part -- have been slow to switch. Sling TV reportedly has 1.3 million subscribers. Its competitors have considerably fewer, and DIRECTV NOW is already having trouble holding on to its early signups.
So far, the competition hasn't had a major impact on Comcast, but that doesn't mean it couldn't. In any event, Comcast is well-positioned should it start seeing subscriber losses again.
Getting ready to stream nationwide
Comcast isn't interested in launching a nationwide television-streaming platform like AT&T's, Verizon's, or Dish's. Nor should it be, as long as its traditional video service continues to perform well and generate loads of revenue.
That said, Comcast is in a position such that it could quickly put together a nationwide streaming service of its own, should it decide to go that route. Earlier this year, the company exercised an option to obtain the streaming rights to several cable networks. While it doesn't include every network it would need to launch a successful over-the-top service, it's a good start -- and it cost Comcast nothing.
Meanwhile, Comcast is in the midst of renegotiating deals with several major media companies, and nationwide streaming rights are likely to be a point of discussion. Media companies are desperate to increase their affiliate fee per subscriber as more people cut the cord, and throwing in additional perks like on-demand and streaming rights is one way to boost revenue.
While it may cost Comcast a little more to buy the extra rights, it can use additional on-demand rights in its popular X1 platform -- which it credits for its reduced churn rate lately. It's also been able to increase its rates, although at a slower pace than programming costs. Consider it insurance in case the competition starts cutting into subscriber growth again.
Furthermore, now that Comcast has its own wireless service, Xfinity Mobile, through its MVNO (mobile virtual network operator) agreement with Verizon, it could market a nationwide bundle of mobile phone and television service. The move wouldn't have the same economic advantages as selling Xfinity Mobile into its existing territory, but it would give the company equal footing against Verizon and AT&T.
For now, Comcast continues to perform well, slowly adding back subscribers, while its competitors look for growth anywhere they can get it. It's also well-positioned for a potential nationwide expansion. Indeed, Comcast shareholders have nothing to worry about.
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