January 27, 2007
Comcast Positioning Itself Through VOD in Competitive Media Landscape

Last Sunday's New York Times featured an in-depth account of the ways in which Comcast, and the cable television industry as a whole, have turned their fortunes around, after many people were predicting only months ago that, between telcos and the Internet and satellite, that the days were numbered for the industry. The article, by Geraldine Fabrikant, profiles some of the innovations at Comcast and the company's philosophy and provides some details about how cable companies have positioned themselves during this time of tremendous media flux.

Fabrikant writes, "Today, the entire cable business, and Comcast, the country's largest cable company, are sitting pretty. Amid the scramble that will decide which companies provide consumers with the flood of new media, entertainment and communications services, cable suddenly looks to be the winner. Analysts now say cable operators are better positioned than their rivals. Until quite recently, however, that wasn't a foregone conclusion because Wall Street -- even discounting the myopia that often distorts its vision -- had good cause to be pessimistic."

In an effort to remain increasingly competitive, Comcast has branched out into providing Internet access and digital telephone service in the past few years, trying to entrench the company--and the cable industry--at the heart of American media consumption. And, as a result, the article notes that Comcast's stock "has risen at least 10 percent a quarter for 25 consecutive quarters", leading to a sharp increase since the stocks fell 22 percent in 2005.

I first wrote about the dips in Comcast's business back in Febraury 2006, after an article in the Wall Street Journal detailed how the company's net profit declined by 69 percent in the last quarter of 2005 due to stock loss on the company's Sprint Nextel holdings and various litigation and tax issues. At the time, I wrote, "The most interesting section of the Grant's article, however, is about the ways that Comcast is combatting this loss--becoming more competitive in the realm of telephone service, as cable and telephone providers continue to go nose-to-nose." At the time, I asked, "Are we headed for even more of an oligopoly or great old-fashioned capitalist competition?" At this point, there's still no sure answer to that question, as telcos, cable companies, and satellite providers all remain very actively in the game.

Fabrikant emphasizes what might be Comcast's strongest advantages, writing that cable companies have started "using competitors' new technology against them. They took advantage of the fact that it is easier to add phone service to cable systems than it is to deliver video over phone lines, and easier and cheaper to add video-on-demand to a cable system than for satellite services to make their signals interactive."

Perhaps Comcast's strongest accomplishment is the development of cable video-on-demand as a viable alternative, educating its consumers to use VOD as a viable form of time-shifting. These programs, many offered free, are usually advertising-supported, and the company has been working to strike a balance for the most effective form of VOD.

Comcast's initial experiments with VOD have led to various successes and failures. Back in September, I wrote about my wife's anger in purchasing a high-definition episode of CSI on demand through Comcast, to test out our new HD box, only to find out that it had a full run of commercials in addition to the fee she paid to watch the episode. For her, $1.50 for one 40-minute episode, plus a full run of commercials, was not worth the cost. Later that month, however, I wrote about Comcast's deal with CBS to provide many of these programs free with advertising support. CBS sells the commercial spots for its VOD programming, which will be initially made available the day after a show airs and will remain online for the next four weeks.

And educating the consumer is certainly a part of providing free content, some of it not even advertising supported. Comcast provides a variety of free movies through its service as well. The idea is to try and encourage subscribers to try video on demand and hopefully entice them to take part in the premium VOD services once they learn how to use VOD effectively. The article points out that Comcast shows older HBO shows for free, in addition to the CBS content. Another of these free initiatives is FearNet, a service which provides horror content on demand and through the Internet free. I've also written in the past about WWE 24/7 On Demand, the wrestling product that has launched not only on Comcast but a variety of other cable providers to give users access to old wrestling matches for a flat monthly fee.

Fabrikant's article also points out the Comcast deal with Sprint to provide mobile content for Comcast users, as an effort to compete with telcos that already have mobile service in-house.

Comcast has also dabbled with finding ways to encourage user-generated content, such as Ziddio, the company's user-generated Internet video platform. Back in November, I wrote about the launch of Ziddio, providing users with the chance to submit content related to various cable networks' offerings. The first two major drives were through the Style Network and Cinemax. In December, the company announced that it would be teaming with Endemol for Ten Day Take, a contest that would solicit user-generated content and choose the best piece to be made into a pilot in only 10 days, with the process being filmed as a form of "reality television.