A Comcast exec explains the company's 'surgical' approach to holding onto TV subscribers and why it's not focusing on price

Comcast

X1.

• As other TV services like Sling TV try to compete on price, Comcast is focusing on its user experience.
• Its X1 set-top box, introduced in 2012, has been aggregating more services like Netflix, Pluto TV, and even Amazon Music.
• The company is betting on customers who are willing to pay for a smarter, simpler TV experience that integrates content from live-TV packages and other apps and services, Matt Strauss, executive vice president of Xfinity Services at Comcast Cable, told Business Insider.
• "For the segments that are more price conscious, we may not be the right choice for them on the video side," Strauss said. "That's okay, too, because we'll look to maintain a relationship with them on internet."
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Comcast Cable executive Matt Strauss knows his company's cable-TV service won't be the right choice for every TV viewer.

Comcast isn't trying to compete on price with services like Netflix and Amazon Prime Video that offer shows and movies on-demand for a fraction of the cost of Comcast's live-TV bundles, or companies like Sling TV that are selling slimmer packages of channels at a discount.

As streaming-video apps offer more ways to bypass cable, Comcast is betting there will still be customers willing to pay more for a smarter, simpler TV experience that integrates content from linear, internet-based, and other services - and that those customer segments will be more profitable than cord-cutters.

"I want to move more towards selling an experience," Strauss, executive vice president of Comcast Cable's Xfinity services, which include home internet, video, security, and phone, told Business Insider. "The more products and services you take from us, the better the experience ... the better the price."

Comcast/Business Insider/Hollis Johnson

The X1 experience

Comcast's X1 set-top box, introduced in 2012, tries to make it easy to search for and discover TV shows and movies by integrating programming from the company's live-TV channels and on-demand library, as well as video services like Netflix, YouTube, and Pluto TV into one user interface. Viewers don't have to first navigate to each service's app to find what they want to watch. And Comcast has been signing up more services to be included in its platform.

"We live in the golden age of television where every choice ever made available is now on demand," Strauss said. "Yet, you were left as the viewer figuring out how to navigate that golden age of television. And that seemed wrong to us. So we wanted to flip it. And we wanted to essentially make it, choices first, technology second."

The segment of TV watchers willing to pay for a premium TV service is shrinking. Comcast's video customer base slimmed nearly 2% to 21.9 million, from the first quarter of 2017 to the same period in 2019. Video revenues were roughly flat at $5.6 billion, year over year. Comcast's top pay-TV competitors also tallied up subscriber losses during the period.

The company is looking to connect with cord-cutters, who are usually drawn to deals and greater flexibility, in other ways.

"It really will come back to this notion of being surgical in how you segment your customer base," Strauss said. "For the segments that are more price conscious, we may not be the right choice for them on the video side. That's okay, too, because we'll look to maintain a relationship with them on internet, and hopefully, over time, try to offer them other types of products and services that they might find of interest."

Comcast has continued growing profits on the cable side of the business - which excludes NBCUniversal and Sky - thanks mainly to its high-speed internet and business services. The cable side's quarterly adjusted EBITDA grew about 10% to $5.7 billion in the first quarter.

The company sells broadband customers a set-top box, called Flex, for $5 per month, which includes the same access to apps as the X1 box but doesn't feature Comcast's live package of channels. Subsidiary NBCUniversal is also launching a streaming service next year that CNBC reported will be free, with ads, for existing pay-TV subscribers, but cost others $12 per month.

The battle for the digital living room

The master plan is to turn the TV set into something like the smartphone is today. Comcast's X1 boxes already bundle video services, as well as others like Amazon Music. And they can control the company's home services, such as security systems, thermostats, and other connected devices. The company is working to integrate and offer more services like those through its X1 box.

"When I say that our strategy was to be the 'aggregator of aggregators,' it was never meant to be limited to video," Strauss said. "The way that we think of the television over the next few years is a device beyond just a conduit for video. It's really becoming the dashboard for the home."

Comcast is far from the only company to take this view. Telecom services, like Verizon, are thinking about TV sets as a hub for the phone. Tech companies like Apple, Amazon, and Roku are offering more services, and integrating them into their apps and connected-TV platforms.

But Strauss believes we're hitting an inflection point for more services to come to the TV.

"You've got big television screens, you've got fast broadband connectivity, and you have the beginning stages of devices connected to the internet," Strauss said. "The stage is being set for the battle over the digital living room. And we see ourselves in many ways as the incumbent, as in the center of that."