Comcast is reportedly killing off the premium Skype service that it tried to lump with XFINITY last year. DSLReports.com is reporting that the country's leading cable company will stop selling the $10 a month Skype service that it offered subscribers to its higher-end service bundles.
It was a bad idea from the start.
There's nothing wrong with Microsoft's popular Web-based videoconferencing platform itself. The problem is that most people use Skype to make free calls over the Web. Why would someone pay $10 a month for modest camera set-top solution?
"Comcast will probably blow this opportunity," I wrote at the time, after Comcast had announced the partnership with Microsoft, but before announcing its pricing strategy.
There's a reason why Comcast has been shedding net video customers over the past few quarters: The company overestimates both its market position and what the market will bear. Instead of using the Skype package as a way to boost its retention rate, it's probably going to see this as yet another juicy profit center.
Why did Comcast think that it could get away with charging $10 a month for what was essentially a webcam rental? Didn't Comcast know that Skype users can call one another for free? Didn't it see what happened to Cisco (NASDAQ:CSCO)?
Cisco thought it could make a difference in the consumer videoconferencing market, but offering Umi Telepresence at a whopping $600 attached to a $25 a month subscription service was out of touch. Cisco eventually slashed hardware prices, and dropped the monthly service fee to the same $10 that Comcast was offering. It didn't matter. Folks weren't paying.
Umi got nixed last year. Now it's time for Comcast to bury the dead.
It didn't have to be this way. Cisco had no choice but to turn a profit. Comcast could've used this as a retention tool, keeping around folks on its lucrative Triple Play packages. Instead, the cable giant went for money.
Comcast has been shedding video customers with every passing quarter, servicing 359,000 fewer customers than it had a year earlier. However, what the average customer is paying has climbed 8% over the past year, to $155 a month.
Do you see the problem? Instead of the growing companies in video that are making their platforms valuable without raising prices, Comcast is encouraging cord cutters to keep snipping. Offering high-def video conferencing through PCs was a great idea on paper, but it fell apart when Comcast got greedy.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.