Comcast (NASDAQ:CMCSA) just took the wraps off its forthcoming Peacock streaming service earlier this month, and it discussed relatively modest expectations: 30 million to 35 million viewers in the next five years, bringing in $6 or $7 per month a pop, for about $2.5 billion in annual revenue.

So, it was a bit curious when outgoing NBCUniversal Chairman Stephen Burke chimed in during Comcast's fourth quarter earnings call to say, "We can make more money in streaming than anyone else."

Disney (NYSE:DIS) and AT&T (NYSE:T) have much higher expectations for their flagship streaming services. Disney sees as many as 90 million global Disney+ subscribers by 2024. AT&T expects HBO Max to reach nearly the same level when including existing HBO subscribers. AT&T expects HBO Max to generate $5 billion in incremental revenue by 2025. Not to mention, Netflix just wrapped up a year where it brought in over $20 billion in subscription revenue.

Perhaps Burke is taking a broader view of the streaming market, which seems to include providing broadband internet service in Burke's view. Still, the chairman seems to make a bad assumption about the strength of Comcast's streaming efforts and its competition.

The Xfinity Flex device.

Image source: Comcast.

Focusing on broadband customers

Comcast hasn't been shy about its shifting focus to provide greater value to its broadband customers. At the top of Comcast's earnings call, CEO Brian Roberts said broadband is one of the company's top areas of investment for 2020. 

It's investing in faster speeds across its markets. At CES earlier this year, it introduced a new WiFi gateway to support those faster speeds. It's offering customers who take the new gateway free cybersecurity protections.

As it relates to streaming, the company made the move to offer a free Xfinity Flex set-top box to its broadband-only customers in September. The streaming device competes with Roku's (NASDAQ:ROKU) devices and smart TVs and Amazon's Fire TV platform. Management said demand for the device among its customers was so high that it ran out of stock, and it's still trying to catch up.

Comcast added more subscribers in 2019 than in any of the past 12 years, and it expects another strong number in 2020. But it's also planning to raise its rates this year, as it adds more value to the subscription. The company can arguably justify higher rates with faster speeds, the free Flex boxes, and the inclusion of Peacock Premium in its broadband subscription. Comments from management suggest they don't expect a rate hike to have a significant negative effect on net additions.

If you consider broadband service as a key aspect of streaming, Comcast is well positioned to keep growing revenue. In fact, incremental revenue from rate hikes and customers self-selecting higher speeds ought to significantly outpace Peacock's contribution. But that's a very broad definition of "making money on streaming."

Making a bad assumption about Flex and Peacock

Burke's comments about streaming seem to rely on an assumption that Comcast's Flex platform will become immensely popular. Sure, demand for Flex is extremely high, but it's also a free streaming device. Whether or not those customers actually use Flex and how much they use the devices remains to be seen.

Flex as a streaming platform is playing catch-up to the big guns like Roku. Since Roku has a much broader and more engaged audience, it's become a must for any streaming service looking to reach an audience on television sets. As a result, the channel selection on Roku devices is vastly superior to the availability of services on Flex. Flex is notably missing Disney services, including Disney+, Hulu, ESPN+, and Disney's TV Everywhere apps, as well as several other high-profile streaming services.

Meanwhile, Roku is highly focused on winning a share of the smart TV market. Management says Roku TVs account for one-third of smart TVs sold in the U.S. Baking Roku OS into the television itself renders devices like Flex or Roku's own devices redundant and often inferior. That's a market Comcast is unlikely to explore, which means it'll become even more challenging to convince subscribers to actually use their free Flex devices.

Burke's assumption about Flex's popularity is especially notable in his comment that Peacock represents a way for NBCUniversal to engage the growing audience of non-linear television viewers, and keep 100% of the ad revenue. But if NBCU wants Peacock on the biggest streaming platforms like Roku, it'll have to give up some of its ad inventory.

On the other hand, the company seems to think media companies like Disney should give up some of their ad inventories to NBCUniversal to sell in exchange for distributing their streaming services on Flex. Burke's comments are out of alignment with Comcast's actual market power compared to its competitors in both the streaming platform and streaming content markets.