A top Comcast exec on how the TV bundle could be fundamentally changed by new streaming services like Disney Plus and HBO MaxBusiness Insider

Business Insider

Ashley Rodriguez

1h

  • Comcast's Matt Strauss shared his theory about how the evolution of cable-TV networks parallels the cosmic theories of the Big Bang and Big Crunch.
  • Using the theoretical scenarios about the creation and fate of the universe as a blueprint, he said the TV bundle could be reformed from streaming-video services, instead of linear TV channels.
  • The economics of distributing subscription-video-on-demand services like ESPN Plus compared with ESPN's TV channels could create more opportunities for companies like Comcast.
  • "As a distributor we're paying on one end, and then the other, we're getting paid. Our ability to launch more of these services direct to the consumer just gives us access to more choices," Strauss said.
  • Click here for more BI Prime stories.

The Comcast Cable executive Matt Strauss has had a front-row seat to the seismic shifts upending the pay-TV industry as the head of the 56-year-old company's Xfinity unit, which includes home video, internet, security, and phone services.

The industry is poised for even more change as legacy media giants that operate the most watched channels in the cable bundle — including Disney, WarnerMedia, and the Comcast subsidiary NBCUniversal — prepare to launch their own subscription-video services online.

Strauss doesn't think that trend will end with these big media companies.

"It seems inevitable that, as the traditional pay-TV market declines, every existing network will have to launch some version of an [over-the-top] service," Strauss, the executive vice president of Xfinity services for Comcast Cable, told Business Insider. It "will likely lead to the great unbundling, where a lot of channels will fall out of the traditional bundle only to be likely followed by the great rebundling of a subset of SVOD services in the future."

To understand what's happening in the TV industry, Strauss has looked to the stars, including a theory about the ultimate fate of the universe known as the Big Crunch.

The Big Crunch

"I think there is an interesting parallel here with the evolution of cable networks," Strauss said.

Like the theory that the universe as we know it started with an explosion of energy called the Big Bang, the cable ecosystem as we know it today was shaped by the explosion of TV channels in the 1990s, created out of the industry shift from analog to digital transmissions that made it easier to launch TV networks, Strauss said.

It gave rise to multiplexes of cable channels, where one programmer could operate a collection of networks geared toward different audience segments. HBO, one of the first TV services to move to digital transmissions, grew in the 1990s from one pay-cable channel to at least seven, including HBO2, HBO Comedy, HBO Family, HBO Latino, HBO Signature, and HBO Zone.

The Big Crunch, as Strauss referred to, theorizes that the expansion of the universe that started with the Big Bang will eventually stop, contract, and the universe will collapse in on itself. The scenario could lead to the birth a new universe with the start of another Big Bang.

We could be seeing an equivalent of that happening with cable networks now as audiences become more fragmented.

The Great Unbundling

Comcast, like other US cable operators, has lost pay-TV customers as people watch more video through the internet, on services like Netflix, Hulu, and YouTube, leaving them with less need for big TV packages like the ones Comcast sells.

Comcast's video-customer base shrunk about 3% to about 21.7 million from the first quarter of 2017 to 2019, during which time its internet business grew nearly 10% to 27.6 million customers.

Read more: 'The cord is still intact': A Comcast exec explains why America's largest TV provider can survive the death of cable TV

With more ways to watch TV and movies without traditional TV distributors, TV ratings have fallen at many of the top US cable channels. In the past two years, more network owners have been forced to merge or rebrand their lower-performing networks, like Viacom's Paramount Network, formerly Spike TV, and NBCUniversal's Oxygen, a network geared toward women that has pivoted to true crime.

Meanwhile, other TV companies are shifting some programming to streaming — planting the seeds for the TV universe to be reformed from streaming TV channels.

HBO Max, WarnerMedia's streaming service that's coming next year, could be thought of as an online "uber network;" it'll combine programming from the company's TV channels, including HBO, TNT, TBS, truTV, and CNN, with original series and movies that are exclusive to the platform. Disney's family-friendly streaming service, Disney Plus, is a mishmash of programming from Disney brands such as Marvel, Star Wars, and Pixar.

The next evolution of the TV bundle

Comcast has been preparing itself for the next phase — rebundling — by positioning itself as the "aggregator of aggregators," as the company is fond of calling itself.

Comcast's Xfinity X1 and Flex set-top boxes integrate into its TV services streaming-video subscriptions like Netflix, Amazon Prime Video, and soon, Hulu, as well as free services like YouTube, Tubi TV, and Pluto TV. The company plans to continue working with media companies to bring the most popular offerings onto the platform.

The company is betting that the myriad services available will leave people with a cumbersome selection of apps to navigate and that some customers will still be willing to pay up for simplicity.

Comcast is one of a handful of companies, including AT&T, Roku, Apple, and Amazon Prime Video, that seem to be vying for this position by bundling streaming-video subscriptions and other video services.

"Having the choices available on our platform is, in many respects, a no-brainer," Strauss said. "As long as you have the option for customers to get access to their favorite channels or choices, even if they pay incrementally for it, is better than not having it at all."

Platforms like Disney Plus and HBO Max will give people more ways to watch movies and TV shows without going through traditional distributors like Comcast. But there's another way distributors can make money off these new streaming services.

Comcast gets a cut of the revenue generated by video services through its X1 set-top box, just like companies such as Roku, Apple, and Amazon do from apps on their platforms. On the other hand, pay-TV providers pay fixed fees to license linear TV channels from companies like Disney or CBS.

"When you look at that distinction, where as a distributor we're paying on one end, and then the other, we're getting paid, our ability to launch more of these services direct-to-the consumer just gives us access to more choices," Strauss said. "It also gives us the ability to be much more sophisticated in truly understanding the price value of the content we are paying for."