How Much Upside Could Streaming Services Drive For Comcast?

In a previous note, we explored factors that are driving Comcast’s (NASDAQ:CMCSA) pay TV business. However, with the rise of over-the-top (OTT) streaming services, Pay-TV providers are losing subscribers and revenues to companies such as Netflix.  Therefore, pay-TV companies such as Comcast and Dish Network are aggressively pursuing over-the-top (OTT) streaming services. Earlier, the company launched Xfinity Stream to improve its offerings. It has recently rolled out Xfinity Instant TV across markets that Comcast already serves. While the company currently does not provide the breakdown for its OTT service,, we believe that the streaming service will be instrumental in retaining and attracting consumers for Comcast’s cable offerings. In this note, we explore the upside to Comcast’s Cable TV business.

Take a look at our interactive upside scenario of Comcast’s Cable TV business.

See our complete analysis for Comcast

Cable TV Subscriber Base Could Grow Due To Streaming Services

Retaining existing customers is becoming paramount to cable companies at a time when cord-cutting is gaining momentum. Improving advanced service offerings has helped some pay TV providers stem subscriber losses to an extent – since the introduction of Xfinity Stream in 2012, Comcast’s market share has rebounded from 22.6% to 24% in 2016. Furthermore, Comcast’s share has improved thus far in 2017 due in part to its streaming products and X1 services. With its streaming service, Comcast could potentially see further growth in its market share despite intense competition and secular headwinds. For instance, Dish Network’s Sling TV has cushioned the company’s subscriber losses, and Comcast could see a similar impact from its streaming service. If Comcast’s market share were to increase to 29% by 2024, its Pay-TV subscriber base would swell to 24.2 million, a level it witnessed in 2008.

This value-added streaming service is currently offered in markets where Comcast is currently operating. The company is also offering Xfinity Instant TV as an add-on feature to its services. Increased adoption of these additional services could result in growth in the company’s revenue per subscriber. If the average fee per subscriber were to grow by a CAGR of 4% instead of the 3.2% we currently project, the average fee would increase to $113 by 2024.

Cumulatively, this scenario would drive revenues up from our current forecast of $28.3 billion in 2024 to nearly $33 billion, and would lead to a potential upside of nearly 10% upside to our price estimate for the company’s stock.

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