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New Comcast-Charter streaming three way partnership suggests the following chapter of the streaming wars is coming

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Brian Roberts, CEO of Comcast (L), and Tom Rutledge, chief govt officer of Charter Communications

Drew Angerer | Getty Images

It’s straightforward to shrug off final week’s announcement that Comcast and Charter have began a three way partnership to achieve market share nationwide in streaming-video distribution. But the 2 largest U.S. cable corporations could also be enjoying a protracted recreation that would result in a brand new chapter within the streaming wars.

Comcast and Charter stated they’d developed a 50/50 enterprise to push Comcast’s Flex streaming platform into extra houses throughout America. Comcast will license Flex to Charter, giving Charter’s Spectrum subscribers entry to the interface. Comcast additionally will contribute its good TV enterprise (XClass) and free ad-supported streaming service Xumo to the enterprise

Charter, in flip, will make an preliminary contribution of $900 million to fund bills and growth. In addition, Charter will provide Flex-operated units and related voice-controlled remotes, starting in 2023. While Flex is not a brand new product, the partnership practically doubles the system’s potential set up footprint.

On the floor, it appears like Comcast and Charter began this partnership years too late. Roku, Amazon, Apple and Google have been making streaming aggregation units and software program for greater than a decade. Samsung’s good TVs include their very own built-in streaming platform. What’s extra, Netflix’s revelation final week that it misplaced prospects for the primary time in additional than a decade suggests streaming subscribers might have peaked within the U.S., no less than for the second.

“It’s hard for you to imagine how they’re going to be successful given the long number of years that we’ve invested in our platform and our competitors have as well,” Roku CEO and founder Anthony Wood stated of the Comcast-Charter enterprise throughout his firm’s earnings convention name Thursday.

Wood added it is traditionally been troublesome for corporations to compete with Roku on streaming distribution as a result of rivals like Comcast and Charter have sprawling companies, whereas streaming is Roku’s sole focus. Roku is No. 1 in big-screen system streaming market share, in accordance with analysis agency Conviva, adopted by Amazon Fire TV and Samsung.

Still, Comcast and Charter have a serious benefit that no different streaming competitor has — technicians who enter the house.

Home courtroom benefit

Nearly each particular person or household that strikes into a brand new home or condo must arrange house broadband. Comcast and Charter are the most important house high-speed broadband connectors within the nation.

Hundreds of hundreds of thousands of U.S. households already use a streaming system and should not really feel a need to modify. But Comcast and Charter service greater than 200 million U.S. households mixed. Comcast CEO Brian Roberts and Charter CEO Tom Rutledge might be united on a method to inform their broadband technicians to attach Flex units after they hook up houses throughout the nation with Internet.

Right now, Comcast and Charter haven’t got many client perks to market with Flex. The corporations can market off the person interface, nevertheless it’s arduous to promote shoppers on one thing they could have by no means seen. Comcast’s voice-controlled distant makes discovering content material amid a cluster of streaming providers straightforward, however Roku and Amazon have voice-controlled remotes, too.

In different phrases, there aren’t many apparent causes for somebody to make use of Flex over no matter system a client already owns. But TVs and streaming units ultimately age. Flex bins, no less than in the interim, are free for brand new broadband subscribers.

If any trade is aware of the enterprise of video distribution, it is cable.

Bundling streaming

Executives at smaller media and leisure corporations have stated privately they’re shocked streaming bundles have not already come to fruition.

“I don’t see a big push to do that,” Netflix co-CEO Reed Hastings advised CNBC in 2020, when the corporate’s market valuation was greater than double what it’s as we speak. “It might be fine to experiment with that in some countries, but it’s not a big area for us.”

Netflix’s latest share plunge and steerage that buyer losses will speed up subsequent quarter would be the catalyst for streaming bundles — a product that begins to resemble a smaller model of the cable bundle.

If Netflix agrees to promote a bundled product — say, purely hypothetically, with Starz, Peacock and Paramount+ — for an combination low cost, a third-party distributor might want to promote that bundle and authenticate consumers of the bundle.

Apple, Roku, Google and Amazon might all be that third-party bundler.

But the “OG” video distributors are Comcast and Charter — the cable corporations. Selling bundles of video content material has all the time been their enterprise.

And now they’re attempting to place streaming units within the houses of hundreds of thousands of Americans. It’s not an excessive amount of of a leap to imagine they’d need to promote prospects a bundle of video subscriptions to associate with the set up of these bins.

“Not only will we bring these products to millions of more customers, but we’ll open the door to brand-new revenue opportunities,” Roberts stated throughout Comcast’s earnings convention name final week.

Rutledge added throughout Charter’s earnings convention name that it is solely a matter of time earlier than nearly the entire firm’s prospects will get streamed video reasonably than cable-connected TV.

“I expect that incrementally most of our customer base will be all [Internet protocol],” he stated.

This will not occur in a single day. But it makes Comcast and Charter’s JV play make much more sense. They’re enjoying the streaming wars lengthy recreation — and hoping the top consequence appears so much like Cable TV 2.0.

Disclosure: Comcast is the guardian firm of NBCUniversal, which owns CNBC.

WATCH: Comcast’s first-quarter earnings outcomes

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