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Comcast Streampix Will Fail to Challenge Netflix's Service


Should consumers spend $4.99 a month on Comcast's debut streaming-only video service?

Over the past decade, Comcast (NASDAQ: CMCSA) began to roll out an impeccable new service to its subscribers called Comcast On Demand. The service was one of the first of its kind, allowing cable users to click on a wide selection of programs and watch them at any time. It was an impressive service that, during an era in which broadband video was not yet the norm, seemed like the next-generation of video viewing.

In more recent years, broadband video has more or less eclipsed On Demand in terms of consumer popularity, thanks entirely to YouTube, Netflix (NASDAQ: NFLX), Hulu, and other online video sites. iTunes and Amazon (NASDAQ: AMZN) have no doubt contributed to the growth of online video, but with the majority of their videos being offered individually, they haven't helped grow the market nearly as much as those who stream video for free or in the form of a low-cost package.

Inevitably, this inspired everyone – from Dish Network (NASDAQ: DISH) and Blockbuster Video to Verizon (NYSE: VZ) and Coinstar (NASDAQ: CSTR) and numerous others – to get into the streaming video business. Thus far, none of the new players are making a dent in this market. And when you look at what each company has to offer, it's not hard to see why.

Take Comcast Streampix, for example. This service was expected to be a significant threat to Netflix, offering both a lower price and the unrelenting support of the world's largest cable service provider. With Comcast's money and licensing power, the company could feasibly produce the most comprehensive video streaming service available. At $7.99 a month (the price of Netflix), a service like that could really hurt the competition. But at $4.99 a month, Netflix wouldn't even have a chance.

That was the assumption, at least, as investors began to abandon Netflix yesterday morning and early afternoon in anticipation of Comcast's new service, which was being hyped as something truly special.

But the reality of the service was much less desirable. As of this writing, Streampix does not offer a single minute of new content. Its most popular shows are already available on other services (Lost is on Hulu Plus and Netflix), have already entered syndication (The Office and Grey's Anatomy reruns aren't hard to find), or were previously available online (past seasons of 30 Rock were recently taken away from Hulu Plus – could Streampix be the reason why?).

If Comcast had wanted to make Streampix more desirable without screwing over On Demand customers – who also have access to Xfinity, the company's other library of online videos – it could have fought for videos that aren't available anywhere else. For starters, why isn't Harry's Law on Streampix? That show has disappeared from Hulu and On Demand, and you can't buy episodes from iTunes or Amazon. Though the show did well during its first season, Harry's Law never made it to DVD. With no other options, Streampix could have scored an exclusive that (if nothing else) would have been intriguing to fans of David E. Kelley legal dramas.

Comcast could have also looked to CBS (NYSE: CBS) for new content. The nation's number-one TV network hasn't been a big supporter of online video, opting to avoid Hulu and most other streaming options. But with a Netflix deal in place and a semi-decent selection of current episodes on, the company is slowly warming up to the idea that streaming isn't all that bad – and can even help a show thrive. (If people can't catch up quickly and cheaply, they're much less likely to start watching a series.)

CBS might be a hard network to crack, but Comcast already has a pretty good relationship with the company. On Demand users can watch the four most recent episodes of most CBS shows anytime they want, complete with shorter commercial breaks and the ability to skip around. By comparison, ABC and NBC shows now feature lengthy commercial breaks and do not allow On Demand viewers to fast forward. This either means that CBS has yet to realize the full potential in monetizing its On Demand offerings, or it simply prefers to give consumers a superior viewing experience.

Comcast could have also bolstered Streampix by acquiring deals with film studios that others don't have. With Sony (NYSE: SNE) and Warner Bros. (NYSE: TWX) on board, the service may one day provide a decent selection of new movies. If it does, this could be particularly damaging to Netflix, which famously lost Sony – and Disney (NYSE: DIS) – last year when Starz said goodbye.

But as of today, Comast has yet to provide consumers with any significant reason to subscribe to Streampix. Inevitably, some people will end up using the service since Xfinity triple play subscribers will get Streampix for free. But who would pay $4.99 a month to subscribe separately? Someone who wants to catch up on Lost or The Office but doesn't want to spend $7.99 a month for Hulu? Someone who wants to watch When Harry Met Sally or Ocean's Eleven but doesn't want to spend a few bucks renting them individually? Call me crazy, but I do not believe there's a very big market for that.

Long-term, it's safe to assume that Comcast will attempt to beef up Streampix and make it more desirable. The problem that I see is that every one of these companies – especially Comcast, Amazon, and Dish Network – are jumping the gun and making announcements before they have anything important to announce. With competition so fierce (and new competitors constantly entering the fray), video streamers are afraid to keep quiet. They seem to think that announcing something – anything – is better than nothing at all.

But that's why Dish Network is doing so well with Blockbuster, right? Because anything is better than nothing?

In this sense, Verizon might be the smartest company of all. Thus far, it has only announced the existence of a streaming video service. Exact pricing, release date info, and content deals have yet to be announced. This gives the company time to properly prepare for launch, and hopefully provide consumers with a reason to subscribe.

If, however, Verizon's content ends up being no better than what Streampix has to offer (it's hard to believe that any other service could be that bad, but you never know), then consumers might have to face the harsh reality that it's not so easy to cut the cord.

Perhaps that is what Comcast is hoping to accomplish.

Follow me @LouisBedigian

Posted-In: Coinstar Comcast Netflix Streampix VerizonTech Best of Benzinga


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