Comcast-Charter joint venture heralds a new chapter in streaming wars

Brian Roberts, CEO of Comcast (L), and Tom Rutledge, Chief Executive Officer of Charter Communications

Drew Angerer | Getty Images

It’s easy to dismiss last week’s announcement that Comcast and Charter have formed a joint venture to gain market share in streaming video distribution nationwide. But the two biggest U.S. cable companies may be playing a long game that could lead to a new chapter in the streaming wars.

Comcast and Charter said they’ve developed a 50/50 venture to bring Comcast’s Flex streaming platform to more homes across America. Comcast will license Flex to Charter, giving Charter’s Spectrum subscribers access to the interface. Comcast will also bring its smart TV business (XClass) and free ad-supported streaming service Xumo to the company

Charter, in turn, will make an initial contribution of $900 million to fund spending and expansion. Additionally, starting in 2023, Charter will offer Flex-powered devices and associated voice-activated remote controls. Although Flex is not a new product, the partnership nearly doubles the device’s potential footprint.

On the surface, it looks like Comcast and Charter started this partnership years too late. Roku, Amazon, Apple, and Google have been making streaming aggregation devices and software for more than a decade. Samsung Smart TVs come with their own built-in streaming platform. Additionally, Netflix’s revelation last week that it was losing customers for the first time in more than a decade suggests that the number of streaming subscribers in the US may have peaked, at least for now.

“It’s hard to imagine how they will succeed given how many years we and our competitors have invested in our platform,” said Anthony Wood, CEO and founder of Roku, of the Comcast charter venture during the earnings call of his company on Thursday.

Wood added that companies have historically had a hard time competing with Roku in streaming sales, as rivals like Comcast and Charter have sprawling businesses while streaming is Roku’s sole focus. Roku is the #1 streaming market share for big screen devices, followed by Amazon Fire TV and Samsung, according to market research firm Conviva.

Still, Comcast and Charter have one major advantage that no other streaming competitor has — techs coming in the house.

home advantage

Almost every person or family moving into a new house or apartment needs to set up broadband at home. Comcast and Charter are the country’s largest home high-speed broadband lines.

Hundreds of millions of US households already use a streaming device and may not feel like making the switch. But Comcast and Charter together serve more than 200 million people in US homes. Comcast CEO Brian Roberts and Charter CEO Tom Rutledge may agree on a strategy for telling their broadband technicians to plug in Flex devices as they connect homes across the country to the Internet.

Right now, Comcast and Charter don’t have a lot of consumer perks to market with Flex. Companies can market the user interface, but it’s difficult to sell consumers something they may not have seen before. Comcast’s voice-enabled remote makes it easier to find content amid a glut of streaming services, but Roku and Amazon also have voice-enabled remotes.

In other words, there aren’t many obvious reasons for someone to use Flex through a device a consumer already owns. But TVs and streaming devices eventually age. Flexboxes are free for new broadband subscribers, at least for now.

If any industry knows the business of video distribution, it’s cable.

bundle streaming

Executives at smaller media and entertainment companies have privately said they’re surprised streaming packages haven’t come to fruition yet.

“I don’t see a huge push for it,” Netflix co-CEO Reed Hastings told CNBC in 2020, when the company’s market valuation was more than double what it is today. “You could experiment with that in some countries, but it’s not a big area for us.”

Netflix’s recent stock price plunge and forecast that subscriber losses will accelerate over the next quarter could be the catalyst for streaming packages — a product that’s starting to resemble a smaller version of the cable package.

If Netflix agrees to sell a bundled product — say hypothetically with Starz, Peacock, and Paramount+ — for an overall discount, a third-party seller must sell that bundle and authenticate the buyers of the bundle.

Apple, Roku, Google, and Amazon could all be these third-party bundlers.

But the “OG” video distributors are Comcast and Charter – the cable companies. Selling bundles of video content has always been their business.

And now they’re trying to bring streaming devices into the homes of millions of Americans. It’s not too much of a leap to assume they want to sell customers a bundle of video subscriptions to go along with installing these boxes.

“Not only will we make these products available to millions more customers, we’ll open the door to brand new revenue opportunities,” Roberts said during last week’s Comcast earnings conference call.

Rutledge added to Charter’s findings during the conference call that it’s only a matter of time before nearly all of the company’s customers start receiving streamed video instead of wired television.

“I expect that most of our customers will gradually be all of them [Internet protocol],” he said.

This won’t happen overnight. But it makes the Comcast-Charter JV game a lot more sense. They’re playing the long game of streaming wars — and hoping the end result looks a lot like cable TV 2.0.

Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.

WATCH: Comcast first quarter results

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