Comcast Said to Gain Rights to Offer Online TV NationwideBy
Agreements give cable giant option to offer channels online
Comcast said to have no immediate plans to go beyond territory
Comcast Corp. has acquired rights from cable network owners to offer their channels nationwide, according to people familiar with the negotiations, giving the biggest U.S. cable operator a backup plan if rival online-TV services catch on with consumers.
The rights allow Comcast to sell video service for the first time outside its regional territories, which include Chicago, Boston and Philadelphia, said the people, who asked not to be identified discussing private information.
In most cases, Comcast acquired the rights through “most favored nation” clauses in contracts, which let the company sell channels in the same places as new online distributors. Since Comcast doesn’t sell traditional cable-TV service in markets like New York and Los Angeles, the rights mean the company could presumably offer a package of channels as an online-streaming service in those cities.
In some scenarios, Comcast asked for the rights as part of broader carriage negotiations with programmers. For now at least, Comcast has no plans to offer a video service nationwide because it still sees opportunity to gain cable-TV subscribers in its footprint, according to a person close to the company.
“When you really try to evaluate the business model, we have not seen one that really gives us confidence that this is a real priority for us,” Matt Strauss, Comcast’s executive vice president for video services, said at a conference in November. “There is significantly more upside and profitability in going deeper and deeper into our base first versus following a video-only offering OTT,” he added, using the industry term for nationwide online video.
Accumulating nationwide rights gives Comcast a hedge in a changing world where internet services like Dish Network Corp.’s Sling TV and AT&T Inc.’s DirecTV Now are proliferating. Comcast’s cable unit accounts for 62 percent of total revenue, with the rest coming from NBCUniversal, according to Bloomberg data. Video represents about half of the cable unit’s sales.
Cable providers need to negotiate separate rights from programmers to sell bundles of their channels beyond their territories. Programming deals last for several years, so it makes sense that Comcast would want to secure the broadest rights possible in case business plans change, the person close to the company said.
Comcast hasn’t secured OTT rights from some partners with which it has long-term deals, according to people familiar with the matter. The company last negotiated an extension with CBS in 2010 and with ESPN in 2012. Neither deal expires before 2020. If Comcast decided to expedite plans for a nationwide TV service, it would need to renegotiate those contracts.
Being able to offer a nationwide service would not only help Comcast compete with Sling and DirecTV but also give the company a more diverse range of offerings if it decides to introduce a nationwide wireless service someday -- something that analysts speculate it could do. Comcast plans to experiment with selling cellphone service later this year, but only for customers within its footprint.
Comcast’s biggest rival, AT&T, introduced DirecTV Now in November, and the service attracted more than 200,000 subscribers in the fourth quarter with packages starting at $35 a month for more than 60 channels. Hulu LLC and Alphabet Inc.’s YouTube have also announced new services that will deliver an assortment of major television channels to paying customers via the internet. They join similar products from Dish’s Sling TV and Sony Corp.’s PlayStation Vue.
Comcast’s delivery of video service to customers has been evolving. Earlier this year, the cable company began enabling its subscribers to get its TV app on Roku Inc.’s devices instead of only through set-top boxes. Comcast also offers a small collection of channels for streaming, known as a skinny bundle, that it plans to roll out to all its subscribers this year, though not to people outside its footprint.
The only thing holding Comcast back from competing with other video providers nationwide is negotiating the rights beyond its traditional footprint, Rich Greenfield, an analyst at BTIG, said in a report last year.
“This should not be terribly challenging for Comcast based on their level of importance to programmers today,” Greenfield said.
— With assistance by Alex Sherman, Lucas Shaw, Christopher Palmeri, and Max Chafkin