On September 25th, Comcast addressed cord-cutting trends by announcing its plan to give free Xfinity Flex streaming boxes to their broadband-only subscribers. While it’s not unusual for carriers to partner with streaming platforms, Comcast has a competitive edge by offering their own OTT device, which pulls customers away from buying a third-party OTT device, like a Roku.
Comcast isn’t the only carrier dabbling in the competitive streaming service market. AT&T partnered with DirecTV to launch AT&T Now, formally called DirecTV Now. Verizon’s Fios Internet service offers YouTube TV subscriptions to customers, with a free one-month trial. Facebook is also stepping into the streaming arena, with their rumored Catalina video streaming project. Previously, Comcast’s Xfinity Flex service came with a $5 monthly charge, but with the announcement of a free OTT device, they’ve also dropped the monthly fee. Large Internet carriers recognize the value of streaming content to TVs and are looking to gain control in the dominant data pipe.
Roku and other OTT device companies are feeling the impact of carriers offering their own streaming services and OTT devices. More than half of all hours streamed come from Netflix and YouTube. Roku’s past revenue growth is partly from getting a cut of subscriptions made on the Roku platform and licensing from its OS. With carriers building direct partnerships with streaming platforms, OTT companies are at risk of getting left behind. Following Comcast’s announcement, Roku’s stock shares dropped an additional 26% this week, after falling 19% last Friday. Analysts from Pivotal Research Group expect the stock to fall 55% due to the amount of emerging competition. Roku’s strong relationship with lower-end TV manufacturers has set them up to gain market share as they look to expand internationally.
Comcast made the first dramatic step towards achieving a competitive edge over OTT companies. Offering free streaming devices and even dropping monthly fees for ad-supported streaming services will inevitably be adopted by other carriers as a means of retention, offering the possibility of generating revenue while gaining control over customer’s streaming time.