Thursday, February 16, 2012

Cable Companies, Don't Fear the Reaper (of OTT Video)

Cable giant Comcast just reported its financial results. And, guess what? Despite all the sturm and drang about over-the-top (OTT) premium video services like Netflix and Hulu cannibalizing its subscription content distribution business, Comcast did just fine. Specifically, Comcast reported healthy profits -- 26% increase in profits from one year earlier.

How did that happen?

Yes, Comcast continues to shed TV subscription customers. But, Comcast's core broadband business -- i.e., so-called "dumb pipes" which carry that video -- is expanding markedly. Comcast added 336,000 high-speed Internet subscribers in its last quarter. And, importantly, Comcast's profit margins for its broadband business are significantly higher than margins in its content distribution business (I have previously written about this).

The accelerating consumer demand for broadband-intensive OTT premium video -- from the growing list of behemoths (Netflix, Amazon, Hulu, Vudu, Google/YouTube) -- will only continue this trend for big "dumb pipe" providers like Comcast.

So, enough with fearing OTT video cannibalization. Providing dumb pipes seems pretty smart to me ....