Comcast has launched movies and TV show purchases in trial markets. Comcast will join in competition with Apple's iTunes and Vudu in allowing its customers to purchase movies digitally through its Xfinity TV platform or online through its website. Regardless of which device the movies are purchased on, they can be accessed by the buyer via STB to the TV, tablet, mobile phone and PC. The offer is limited to Comcast subscribers.
The cable giant plans to offer 'early EST' (electronic sell thru) making films available for purchase before they are available for digital rental and pay TV VOD or on DVD. IHS understands that Comcast, which owns NBC Universal, will be offering its digital movie purchasing with Ultra Violet (UV) rights locker subscription. This is a first among cable operators and is a big step for the movie studios who are pushing for better adoption of UV across the spectrum of digital content retailers.
Long term this move has the potential to be an important development for Home Entertainment in the US as it opens the door for consumers' purchased content to be integrated into the core TV experience for the first time. This boon in practicality, combined with other enhancements to EST product (e.g. early window, more flexible pricing), should help to further EST adoption, especially as other pay TV operators get on board - unlike Verizon's older Flex View EST offer which launched in 2010, where Comcast has gone others will likely follow.
However, this long term potential should also be seen in the context of other, more near term concerns. Most important of these is the trajectory of Comcast's paid-for on-demand service, which has seen stagnation in terms of revenue growth between 2010 and 2013. Over the same period, online purchases of movies and TV shows from services such as Apple's iTunes and Amazon have grown at double-digit rates; and online movie rentals by two hundred and ninety three per cent. In this context it is perhaps not surprising that the cable giant has decided to move into EST.
Strictly speaking this is a reentry into the digital transactional business for Comcast, which experimented with a paid online offer as part of its Fancast service. Fancast's transactional offer closed in 2010 having failed to see any meaningful consumer adoption. The new service differs in a number of key respects from Fancast though. First and foremost of these is the integration with both the cable set top box (STB) and the ability for consumers to access content on other devices, particularly tablets. Device integration has been proven to be a fundamental component of digital entertainment services ranging from iTunes and Xbox Video to Netflix and Spotify. However, device availability is not a guarantee of adoption: Best Buy's CinemaNow service has not seen significant uptake despite being available on game consoles (Xbox and PS3), smartphones and tablets via the App Store and Google Play - in this case what the company is missing is any real incentive for customers to use their service (e.g. Vudu and Target have both used aggressive 'free' movie offers to acquire customers). At launch Comcast's key incentive is the fact that their service is implemented via consumers' pay TV set-top box - a device which is already at the heart of its customers' audio-visual entertainment. However, as Verizon's Flex View offer illustrates, even integration into the main STB is no guarantee of significant EST adoption.
Whatever the immediate prospects of Comcast's service it is worth considering its effect on UltraViolet. As things stand, in the absence of UV support from Apple, Amazon and Microsoft, Comcast is set to become the first major service provider to offer a UV service; and, tellingly, once the service is fully deployed it is likely be the first major provider to be able to provide UV to consumers' main TV set. This could be a significant feather in UV's cap. The rights locker has seen good growth in new accounts, but this has not been matched with service provider adoption (the current standard bearer, Walmart's Vudu, has a sub-10 per cent share of EST), or, according to well-placed anecdotal data, usage. However, in this context Vudu provides a salutatory lesson - despite offering UV, the service provider continues to be predominantly a VOD service. This is emblematic of two key challenges for UV: i.) a continued lack of awareness of what UV is among consumers and ii.) that simply offering UV is not enough to change the way consumers think of and use a service. In addition for UV to really prosper Comcast must address iii.) the user experience issues that come along with integrating a more complicated service offer that combines the traditional linear TV experience, VOD, DVR and helping users manage and browse libraries of their own UV content. IHS believes that resolving these issues is fundamental to the adoption of any Comcast UV offer.