TO: Mark A. Cooblitz, Senior VP of Strategic Planning, Comcast
FROM: Nicholas Pulis, Strategic Planning Team
RE: Trends: A Description, Prediction, and Prescription
DATE: April 29th, 2013
Part One: Executive Summary
As a company Comcast-NBC has witnessed the changing media in its practical entirety. The trendy field of communications is one capacity that NBC has proficiently conquered for nearly a century; however, it is safe to say that this digital age has provided an extreme disruption to the company. For a team involved in strategic planning it is vital that these interrupting trends are not only identified, but analyzed, forecasted, and prescribed. In today’s day and age it is not what is happening now it is what is happening next, and if Comcast wishes to continue being the industrial powerhouse they currently are they must follow suit and advance. As a company, Comcast-NBC is “striving to create the best content and constantly pursue innovation to delight consumers.” This philosophy is relevant, but there are three trends that Comcast must become aware of if they wish to survive in this rapidly shifting field. Cord cutting, digital streaming, and big data are three trends that are not only transforming media but are trends that will make up the industry in the future. It is up to Comcast to decide whether they would rather fall to the wayside, or grab a hold of this remarkable opportunity and flourish.
Part Two: Company Analysis
Prior to analyzing where Comcast is going you must first understand where the company stands today. Starting in December of 2009 Comcast/NBC has not stopped advancing. Every media shift that has occurred following the merger has established the company. Comcast does an extraordinary job in absorbing the ideas and advancements around them. By adopting these progressions shortly after creation they are able to reproduce the innovation in the highest quality. For example, last year Comcast was able to take a prosperous idea and make it monumentally better. Many would agree the ability to record television using your television programming from your mobile device is quite convenient, however Comcast was able to take that to the next level. By adding the ability to see individual recordings, choose to watch any of them now, change their deletion priority, or even delete them remotely, Comcast was able to do what they do best and advance. Comcast has an abundance of strengths, yet there is always room for improvement. Due to the size of the company, and the millions of consumers, Comcast is facing an “overload.” Most like the rest of the media industry the Comcast is facing the words “too much.” Between programming, employees, and distribution costs Comcast finds themselves continuing spending money they do not need to. The industry is changing, allowing companies to cut down more and more each year. By simplifying everything digitally, businesses are able to progress and make advancements without spending. If Comcast were able to drop there overall spending in the slightest bit there general wellbeing would improve. By cutting costs Comcast will be able to take advantage of the many opportunities that have arose. Three opportunities that Comcast could pursue if costs are cut include, investing in new innovations, develop new digital software, or even further research in distribution. While Comcast can be confident as a company they should be aware that there are companies that spend an ample amount of time recruiting, and if they wish to continue to be one of the greatest places to work in the world they need to do there best to encourage young “tech-savy” individuals to join them. By understanding the preceding information Comcast will have the utmost ability to capture the three trends of cord cutting, digital streaming, and big data.
Part Three: Cord Cutting
The term cord cutting refers the removal of watching cable within a household. Not to be confused with the idea that content is not being watched. People are still watching content, just in different ways. The trend cord cutting is very important because as a cable provider Comcast is very skeptical about their future. Cord cutting records show staggered statistics of which way cord cutting is moving. Some months they show progress and other times it shows nothing, nevertheless it is occurring and Comcast must be ready for anything. The reason behind cord cutting is that viewers do not feel the need to pay a bundled fee to only watch minimal content. In 2012 there were 5 million households that could be labeled as “zero-TV” households.
Another statistic shows the cable providers are struggling to find new customers. In 2012 there were only 46,000 new customers for cable. Considering the number of people who had the potential to be a new customer this is very low. The key cause for customers not cutting their cable is special content that cannot be distributed easily if not on cable. If it weren’t for this than cable would be in great misfortune. Companies all over have realized this shift and have began offering other ways to watch their content. For example, digital streaming is becoming a huge threat to cable providers. Lucky for Comcast they have to ability to try and work one end of the company up while the other one slowly diminishes.
The future of cord cutting could be very interesting to witness. Analyst work very hard to recognize where this trend is going, but at this point it is very hard to understand. Some people believe that cord cutting situation is going to be similar to that of one we saw with landlines. It is hard to see whether the trend will be taken to that extreme, however it is easy to see as time goes on more and more people are going to make the move to other sources of viewing content. Most prominent media analyst believe the death of TV is near, but one man by the name of Andrei Jezierski wrote a book about turning digital dimes into dollars. In the book he talks a lot about how viewers of television enjoy watching television. That it is not always the content, but the experience. These thoughts are valid, but may not be strong enough to convince rise media giants, such as Google, to buy up television networks. Making anyone who does not start to make changes now very vulnerable.
Going by the numbers, and the actions of the consumers Comcast needs to get out of the cable industry. They need to stop buying cable networks from NBCUnversal and start thinking about how they are going to distribute their content once cable is gone. This could be a very smooth transition for Comcast, but action must be taken immediately. If Comcast is able to jump into digital streaming, much like many other content providers, they will be just fine. The hardest thing for Comcast is going to be to come to reality that even though it might not be easy to see now, cable is not promising, and the sooner that they can admit that the sooner they will be able to move on as a company. By getting involved with other companies, such as Hulu or Netflix, Comcast will be able to learn the ropes of digital streaming and maybe become involved in the better trend of the media market.
Part Four: Digital Streaming
The concept of digital streaming first became prominent in the mid-2000s when HTTP-based and content delivery were being used to provide the highest quality content to a large audience. It would not be until later 2000s that major companies began to make moves with streaming, and providing their consumers streaming capabilities. Microsoft was the first to jump on board, with Apple shortly there after. As streaming became popular more and more platforms began to be developed. This caused a major disruption within the market. In turn, companies involved in the creation of streaming met together to design one platform that could be used by everyone. On April 2012 Dynamic Adaptive Streaming was selected to be the universal system for streaming, bringing us to where we are today.
Streaming has developed into a billion dollar industry, and it is only getting larger by the minute. Streaming businesses and media companies have created plenty of opportunities to make money, from the creation of boxes that allows the streaming of content to the selling of content to websites such as Hulu. Take Roku for example. Since the development of the company in 2008 they were able to sell 5 million boxes. These numbers are extremely impressive because they compete with an industry that is full of devices that have the ability to access the Internet. Roku is just one of the many examples of digital streaming success stories, but in order to get involved with digital streaming a company must understand the consumer. Three of the most important questions that Comcast must ask are who is streaming, what are they streaming, and what are they streaming from. Statistics shows that there are people of all ages that are streaming video, but it is safe to conclude that the “Internet-Pioneers” are dominating the market. Jack Myers, an expert on the generation, believes that the success of an industry such as this one relies on the “Internet-Pioneers.” The generation, consisting of those born after 1992, has shaped the way we use the Internet, and will continue to shape it. This makes it crucial that these consumers are getting what they want. Consumers want to be able to view the content they want, where they want, when they want it. If Comcast is able to discover a way to do this then they will be able to successfully satisfy the market. Yet, as Comcast already knows they cannot fail to reach the global market. Lucky for Comcast, streaming is a worldwide trend. Take a look at the following graph for example of where people stream from, and how they are streaming them.
As the chart shows streaming takes place from a number of devices including tablets, smartphones, TV (other device.) In addition the chart shows that streaming is done not only in the United States, but also globally. This allows for Comcast to attack a market they are used to.
Knowing where streaming stands today is valuable, but understanding where digital streaming is going it most important. Innovators and CEOs have worked hard to try to predict ideas of where innovation is going. Reed Hastings, CEO of Netflix, believes he has found the next stepping-stone for digital streaming. His prediction is that the traditional “channel” is going to be replaced by apps. Applications have transformed the world and how people receive information. The accessibility of apps is irreplaceable and for this reason Hastings believes that everyone must get on board. He states, “Existing networks that have not developed first-class apps will lose viewing and revenue.” With Netflix surpassing HBOs number of subscribers in 2013 it is safe to say they have done the proper analysis. Another prediction is that content that is being streamed is going to become more and more targeted and personalized. As much as people get to watch what they want, there could always be more advancement. In the next 10 to 15 years there will be “a la carte” programming. Consumers are going to be able to purchase the different channels they want, and view the content that is personalized for them. These trends will better the market, and allow for revenue growth, but could be disruptive if the changes are moving too quickly. By understanding what these predictions are stating will enable Comcast to take initiative.
In order for Comcast to maintain their media industry leader status they need to begin developing. Using the preceding predictions Comcast can revolutionize digital streaming. As Comcast is aware of, the development of X1 generation is well into development. The product your company is creating is a tremendous start into where the industry is going. With the ability to access the Internet, and the ability to download apps Comcast is well ahead of the game, nonetheless there is still leeway for more. If Comcast is able to grasp the idea of “a la carte” content they will be more advanced than any other company within the industry. By offering Comcast’s 15 national cable networks, 13 regional sports and news networks, and more than 60 international channels individually through applications viewers will be able to watch exactly what it is they watch without having to pay the bundled price. This would create a desire within consumers to own the X1 platform.
Part Five: Big Data
Big data refers to the amount of data that is brought into the world each and everyday. It is a concept that has been developed in recent years and is still trying to make a successful mark on the world. Big data is a concept that is very hard to fathom, not because it is a complex idea, but because of the outrageous statistics. Every day 2.5 quintillion bytes of data is created. Moreover, 90% of the data that exists was created in the last two years. These remarkable numbers show that there is potential for companies to advance like never before. Many companies today do not know how to use all of this data that is being absorbed into their research and development departments. One company that has started to make use of this pool of knowledge to try and better the company is Amazon. Over the past year Amazon has used the information provided by big data to improve their customer service departments. By knowing who it is shopping on their website, what they purchased, and what is it they need, they have improved relationships with consumers. Within the media industry, tech start-ups and app developers heavily populate big data. All of the information that is acquire about a consumers streaming habits allows companies to get a better understand of what it is consumers want. By having this type of information companies have the advantage over most companies. In many ways big data can be considered the “new oil.”
Big Data has one of the most prominent futures for any aspect of any industry. The potentials are limitless and it important that Comcast understands this. Big data is going to take over life, and will transform how we live, work, and think. Google is one company they has been part of the big data ride since the beginning, and because of this they are the kings in the field. For example, in 2009, Google stated that they could predict the progress of flu by simply looking at the words that area being typed into browsers. This thought is truly remarkable, and it is only going to escalate. 10 years from now the amount of data we will be astonishing. The graph below represents growth of big data up until 2020.
The only way to organize it all will be to put it in a library within the “clouds” of the Internet. Companies that are able to develop a way to organize it all will be extremely profitable. They will be able to sell the resources to those who wish to have the information without having to search through the sea of data themselves. The amount of data will allow for more personalized content creation. This will completely flourish not only television production, but also film production, and online content.
Due the tremendous growth of big data, Comcast will have unbelievable opportunity to achieve greatness, and there are several ways to take what is ahead for the industry and be innovative. Comcast being an Internet provider has the edge on almost every competitor. By hiring employees familiar with big data Comcast could be a pioneer in using the data as a source to develop content. By using the information provided by the consumers Comcast will be able to deceiver what it is people watch, where they are watching it, and how they are watching it. The how they are watching could be very important to Comcast. In the future watching content in a serial style could be very popular. By Comcast understanding this they could release content in bulk to fit viewers needs. This is already being done with Netflix’s house of cards. Another way big data could be used by Comcast is through NBC Universal’s film production. Similar to the way Comcast can create television-like content, big data will provide information on moviegoers. Comcast will essentially be able to get reactions on movies before they are even released, allowing them to market their productions more efficient. This will increase box office number tremendously. The best advice for Comcast in this current state of big data is to discover it, analyze it, and understand it. By doing these three things Comcast will be able to hold on to their media crown.
Part Six: Conclusion
As Comcast can see the media world is changing like it has never had in the past. This should not cause apprehension within the company, yet should spark a flame of determination and innovation. Comcast being one of the most successful and profitable corporations in the world, and for this reason they must make a push to continue their success. The three trends mentioned before are all very important in their own way. Understanding cord cutting, digital streaming, and big data will allow for Comcast to make the proper decision when given the choice what path the company should take. It may take ten years till these trends make up the media industry, but as any innovator would agree, “Why use the ladder, when you can dive on in.”
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