Fool on the Street: Comcast on Demand

At the Merrill Lynch Media & Entertainment conference a couple of weeks ago, executives from Comcast (NASDAQ:CMCSA) spoke to a gathering of analysts on its future plans for "triple play" success. To give you the inside scoop on what these analysts know that individual investors don't, I listened in and wrote up my thoughts.

Triple play? This isn't baseball!
David Juliano, Comcast's VP of marketing and product development, launched headlong into an impassioned dissection of the broadband Internet service market and how Comcast Cable competes against DSL providers like Verizon (NYSE:VZ) and AT&T (NYSE:T).

Dial-up is no longer an issue, according to Juliano, and he says that cable is beating DSL on both performance and features, making the service worth its premium price. And even though telecoms are rolling out fiber-optic networks with increasing fervor, Juliano sees cable operators staying ahead thanks to the extra bandwidth afforded by the next-generation DOCSIS 3.0 cable communications standard.

All that juicy bandwidth lets Comcast push plenty of voice, data, and video information through its pipes -- the much-vaunted "triple play" strategy. Having a coherent set of services available for consumers through what boils down to a single data stream lets the company save on infrastructure costs and cut down on expensive marketing calls.

We demand on-demand!
Video on demand (VOD) is a key part of the cable industry puzzle. Juliano says that it's the most important feature in its video strategy right now, especially when combined with high-definition content. He says that customer churn halves when moving from analog cable to digital, then halves again if the customer actually uses VOD -- and over 60% of Comcast's digital customers do watch VOD content already. And that's before this fall season, when exclusive agreements with News Corp's (NYSE:NWS) 20th Century Fox, Walt Disney (NYSE:DIS), and Time Warner's (NYSE:TWX) New Line Cinema bring high-definition versions of Star Wars, The Chronicles of Narnia, and the Lord of the Rings trilogy to Comcast subscribers -- on demand. If that doesn't get a buzz going, I don't know what will.

VOD really does look like the way forward, and I think it's refreshing to see an industry leader willing to spend some time and money on making it work today. Sow the seeds today and reap them in a couple of years, when advertisers catch on to the power of supreme convenience -- an important keyword in American marketing.

Of course, all of that means that digital cable subscribers become even more of a prize commodity. Comcast claims 10.5 million digital video subscribers today, or about 50% of its cable TV customer base. Not only do they pay more for services, but digital cable is also the gateway to heavier drugs like pay-per-view, VOD, and high-definition channels. As long as Comcast can keep selling these heavy-duty services to its customers, its triple-play strategy should allow it to maintain its market share in a competitive environment.

That wraps up our report from this presentation with Comcast, but stay on the lookout for more "Fool on the Street" reports that bring you juicy information that only the analysts have heard.

Further Foolishness:

• Comcast's co-CFO was optimistic about the company's future.
• The big boys like Comcast are coming back with a vengeance.
• Turn your portfolio upside down and see what happens.
• Comcast is facing more competition than ever.

Walt Disney and Time Warner are both Motley Fool Stock Advisor recommendations. Try a 30-day free trial to see how the Gardner brothers are building their entertainment keiretsu.

Fool contributor Anders Bylund is a Disney shareholder but holds no other position in any of the companies discussed here. He is deeply addicted to on-demand TV, even though he does not own a high-def television set yet. You can check out Anders' holdings if you like. Foolish disclosurerules hear all and see all.