2. NICK KERR
Information Systems
Experienced with helping
lead small businesses,
such as ōEvent and
Prodigix Software
2nd place winner of
Google Fiber Case
Competition
Enjoys reading, music,
and weightlifting
JIMMY GILLESPIE
Accounting
Experienced with
technology startups and
venture capital
2nd place winner of
Google Fiber Case
Competition
Ranked 5th nationally in
Spikeball
BRADEN ANDRUS
Accounting
BRADY CHAMBERS
Accounting
Experienced with market
research, teaching and
entrepreneurship
4th grade district chess
tournament champions
Aspiring Consultant
Experienced with product
startups such as
Innovation Catalyst
Incoming intern at
technology startup,
Lucidchart
Wiffle ball junkie
MEET OUR TEAM
4. EXECUTIVE SUMMARY
THE PROBLEM OUR SOLUTION
Demographic Shift - The data shows that the younger generation
(18-35) prefers Internet-enabled content and shows less interest in
traditional Cable Television setups. People under the age of 34 watch
20 hours less traditional TV than people above the age of 50, on
average. Also, the preference for watching traditional TV is 28% lower
for the younger generation. This shift in demographic preferences
poses a significant threat to Comcast’s traditional business model.
Industry Trends - The rapidly rising popularity of streaming
services such as Netflix, Hulu, and Amazon Instant Video have opened
the door to other non-traditional modes. Recently, HBO and CBS both
announced the availability of all their content directly via streaming.
These trends are driving customers away from Comcast’s traditional
cable TV packages.
Declining Profitability - Cable TV and Broadcast Television are
Comcast’s worst-performing business sector, with Broadcast TV
showing a rapid decline in revenues. In addition, Comcast’s costs are
rising at twice the rate of the revenues from subscriptions in their
Cable TV business.
XFINITY X1 Online Lite - We recommend that Comcast develop
and release an online expansion of their popular X1 Entertainment
Operating System. This will be a pared-down, simplified version
targeted specifically towards those who do not have any Comcast
cable or internet packages. XFINITY X1 Online will compete with other
online streaming services, increase market penetration, and establish
brand loyalty among the younger generations.
XFINITY X1 Online - Similar to XFINITY X1 Online Lite, Online is
targeted for customers who prefer to subscribe only to Comcast
internet packages without cable TV. X1 Online will give customers the
same streaming capabilities, but with added features such as more live
content, 4K streaming, and recording capabilities. The goal of XFINITY
X1 Online is to encourage those who prefer to “cut the cord” (cancel
their cable subscritption) to stay within the Comcast ecosystem of
entertainment. This also takes advantage of deeper market
penetration within the internet industry.
Expanding the current X1 - X1 as it stands has been a huge
revenue driver for Comcast. We recommend continuing to expand the
product in its current format to the more established generations (35-
55+); this can be accomplished through promotions, referral
programs, advertising, bundle deals, and additional tutorials and
support.
6. A QUICK LOOK: COMCAST’S CURRENT SITUATION
A quick look at
41 million subscribers
4.9
billion dollars in
revenue
6%
19
Annual growth rate
2014 Emmy Awards
Emerging Competition
21.7 40% $1.56
million subscribers of Comcast customers
use HBO
billion current revenue
attributable to HBO subscribers
Richard Plepler, CEO of HBO, announces HBO Now in
partnership with Apple. This will allow consumers to stream
HBO directly without needing a cable subscription.
2015
7. People under the age of 34 watch
about 20 hours less
per week of traditional TV than
people above the age of 50;
the preference of watching only
traditional TV has dropped by
28% between these generations
Demographic Shift
The popularity of streaming
services is causing content
providers, such as HBO, to offer
their product independently of a
cable subscription
Industry Trends
From 2006 to 2014,
programming costs grew at an
annual rate of 9.3% while
revenues grew at only 4.9%
Declining Profitability
THE PROBLEM: KEY FACTORS
THE PROBLEM:
Traditional cable TV,
Comcast’s largest driver of
revenue, is threatened
8. THE PROBLEM: SUPPORTING DATA
Market penetration in Cable TV has
steadily declined, diminishing by 6%
from 2009 to 2013
Cable TV is Comcast’s slowest area
of revenue growth, and Broadcast
Networks are experiencing a rapid
revenue decline
With each generation, preferences
are shifting more and more towards
an Internet-centric entertainment
package
9. THE OPPORTUNITY: INTERNET
While the Cable TV industry appears to be in turmoil, there is a bright side: the Internet is growing, and
Comcast is poised to grow in this sector.
The market for internet service is huge. At $223 billion,
it’s nearly 30% larger than even the Broadcast and
Cable TV market ($173 billion).
MARKET SIZE
Comcast owns a considerable portion of the massive
internet market, with 38% market penetration as of
2013.
MARKET PENETRATION
In addition to already controlling a sizeable portion of the
internet market, Comcast’s market penetration and
revenue rates in this sector have grown steadily. In
2013, internet was Comcast’s fastest growing sector with
$10.3 billion in revenues and 8.3% revenue growth.
COMPANY GROWTH
Consumer trend data indicate that the market for
internet service will continue to grow, and Comcast will
be poised to grow along with it. Nearly half of the
younger generation (34 or younger) typically view
entertainment on an Internet-enabled device, such as a
laptop, tablet, or smartphone.
CONSUMER TRENDS
10. OUR METHODOLOGY
Understand
the Problem
In order to create valid solutions to help Comcast, we first needed to
make sure we completely understood the problem. By analyzing the case
and breaking the problem into three key factors (demographic shift,
industry trends, and declining profitability), we were able to better
discriminate between effective and ineffective solution ideas.
Identify
Opportunities
Create
Solutions
In addition to addressing the key factors of the problem, our solution
also needed to take advantage of the opportunities available to Comcast.
By identifying the biggest opportunity available to Comcast--their
position in the Internet industry--we were able to further expand our list
of requirements for a successful solution.
By combining our analysis of the problem with the areas of opportunity
we identified, we compiled a set of specific criteria to measure each
possible solution. We then held several brainstorming sessions to identify
as many solutions as possible -- eventually settling on the solution that
best met our criteria.
Address demographic
shift
Ride industry trends
Improve profitability
Use internet
opportunity
CRITERIA:
12. OUR STRATEGY
Effectively Target All Customer Demographics
Take Advantage of Trends
X1 Online Lite X1 Online
Expansion of
current X1
Increase Comcast
Profitability
Profitability
Demographic
Shifts
Industry
Trends
STRATEGY FOUNDATION- The objective of
our strategy is to (a) address the problems
identified, (b) increase the profitability of
Comcast, and (c) position the company to be
a market leader in the future
EFFECTIVE TARGETING- Different
demographics have different preferences and
need a product specifically catered to their
needs
MAKE THE TREND WORK FOR YOU-
Comcast needs to make the most of the
trends rather than fight the change
X1 EXPANSION- The product that has done
so well for Comcasat needs to be expanded to
meet the needs of Comcast’s current and
potential subscribers
13. • Ages 35 - 55
• Average TV per week: 40 hours
• 29% typically watch TV series
using the internet
• “Swing group”
GOAL FOR SEGMENT
• Get innovators to use X1 Online
and then convert to current X1
package
• Ages 18 - 34
• Average TV per week: 24 hours
• 45% typically watch TV series
using the internet
• “Hate group”
GOAL FOR SEGMENT
• Use internet trend in Comcast’s
favor and penetrate with X1
Online Lite bundle
• Ages 55+
• Average TV per week: 48 hours
• 17% typically watch TV series
using the internet
• “Love group”
GOAL FOR SEGMENT
• Increase the quantity who
upgrade to the current X1 cable
package
Generation X Baby BoomersMillenials
CUSTOMER SEGMENTS
15. X1 ONLINE LITE - OVERVIEW
Xfinity
X1 Online
Lite
WHAT?
WHY?
$20 Standalone Package
Streaming capabilities for this content for anyone with an
internet connection
Internet TV
Large library of TV shows and movies from HBO and NBC
On Demand Library
HBO subscription in order to recapture lost revenue, NBC
and Hulu because of Comcast’s ownership
Hulu, NBC, and HBO
The number of pay TV subscribers has decreased 5 years in
a row for a total decline of 3 million subscribers
Pay TV trend
With more people “cutting the cord’, Comcast can generate
revenue from these customers
Revenue
Comcast must either innovate or lose out on an entire
generation of customers
Millenials
Younger Demographic, Increased Competition
16. “Content lovers”
Diversity
“Binge watchers”
On Demand
“Mobile fanatics”
Accessibility
XFINITY X1 Online Lite
doesn’t require any other
Comcast subscription to
operate, making it lightweight
and simple to adopt. In
addition, the $20 price tag
places X1 Online Lite in a
position to compete for the
coveted Millenial market.
“Penny pinchers”
Low Price
$
X1 ONLINE LITE - FEATURES
Provide a simplified extension of the X1 Entertainment Operating System to Millenials and streaming lovers.
X1 Online Lite will feature a
simple and diverse live
content selection: NBC, HBO,
Hulu content, and limited live
sports. In addition to this live
content selection, Online Lite
will offer archived versions of
popular TV shows from these
channels, as well as new
movies for rent.
The extensive archived
content selection will appeal
directly to those who prefer
to “dive in” to a series,
watching several episodes in
rapid succession. This
feature will enable X1 Online
Lite to compete directly with
other streaming services
such as Netflix.
Requiring only an Internet
connection, X1 Online Lite
will be available from any
device, anywhere, any time.
The users will be able to start
a show on their television
sets, and resume where they
left off on their smartphones
or tablets.
17. Recapture HBO Revenue: 40% of Comcast customers have HBO included in
their package. If Comcast were to lose these customers to HBO Now, they would
lose $15 from each of these customers, resulting in 1.56 Billion dollar decrease in
revenue.
1
Enter a New Market: 17% of 18-34 year olds don’t watch traditional TV.
Providing a cheap alternative reaches this demographic, giving them the
opportunity to satisfy all of their demands at a cheaper price.
2
Build Brand Loyalty: As the younger demographic starts looking for more
expensive options, Comcast will provide accessible alternatives that will transition
these X1 Online Lite customers into X1 Online and X1 buyers
3
X1 ONLINE LITE - BENEFITS
7.62%
$1.56 B
Comcast TV
Revenue
Potential loss
to HBO now:
19. X1 ONLINE - OVERVIEW
Xfinity
X1 Online
WHAT?
WHY?
$20 Online TV Package for Comcast internet users
Option to record shows in cloud-based storage
Recording Capability
Offering a cheap internet TV option as part of the internet
package will increase number of Comcast internet subscribers
Internet Industry
Revenue
Comcast will stay ahead of competitors and be the best option
for those who want to “cut the cord”
Increase Customer Base
Take advantage of trends
Using only home internet, subscribers can stream in 4K
4K Streaming
With a product to rival HBO Now and Netflix, Comcast will be
able to generate large amounts of revenue
HBO subscription to recapture lost revenue, NBC and Hulu
because of Comcast’s ownership; CBS & Fox for more content
Hulu, NBC, HBO, CBS, and Fox
Streaming capabilities for this content for anyone with on a
Comcast internet connection
Internet TV
20. X1 ONLINE - FEATURES
“Perfection seekers”
4K quality
“Couch critics”
Movies
“Show hoppers”
Convenience
XFINITY X1 Online will offer
all of the same content as the
Lite version, with additional
available content from a few
other popular channels and a
more extensive sports
selection.
“Television conoisseurs”
More channels
Incentivize X1-Online-Lite-lovers to purchase an internet package to receive these additional benefits.
The additional content
offered by X1 Online will be
coupled with incredible video
quality. Selected content will
be available to stream in full
4K quality, provided that the
user has subscribed to a
Comcast internet package
that supplies sufficient
speed.
The user will receive access
to an extensive video library
of thousands of archived
movies available for viewing
on-demand. In addition, X1
Online will offer a greater
selection of new movies for
rent compared to X1 Lite.
X1 Online subscribers can let
go of their fear of missing
new live content. With X1
Online, subscribers can
record up to two live shows
at a time, ensuring that they
never have to get behind.
21. Converts limited-version users: The quality of the Online version is far
superior to the Lite version, yet the price is smaller. The savings will draw
customers to purchase internet with Comcast in order to use the full version.
1
Enhances internet industry market share: The internet industry is $60
Billion bigger than the Pay TV industry. As internet TV popularity grows, so will X1
Online and Comcast Internet revenues.
2
Lays foundation for the future of TV viewing: Whether “cutting the
cord” happens or not, Comcast will be prepared with a large market influence in
both Internet and cable TV service. Infrastructure will be in place to expand into
wherever the market demands.
3
1
1
X1 ONLINE - BENEFITS
asdf
$ 250
Revenue in
Billions
$ 150
$ 50
Internet
Industry
Pay TV
Industry
23. EXPANDING THE EXISTING PLATFORM
X1
$
X1 Entertainment Platform:
Current Benefits and Impact
5 million
subscribers
20% more
video-on-demand
purchases
$7.5 billion
estimated revenue
from X1 customers
20% less
voluntary churn due
to effective targeting
24. EXPANDING THE EXISTING PLATFORM
PROMOTIONS ADVERTISING &
AWARENESS
Comcast currently
bundles X1 with
triple-play packages.
Expanding to allow
X1 with certain
double-play
packages will
expand X1’s market
penetration.
BUNDLING
REFERRAL
PROGRAMS
TUTORIALS &
SUPPORT
SUGGESTIONS FOR EXPANSION
We believe that Comcast should take advantage of the existing X1 Entertainment System platform by expanding the market penetration among the more
established generations (35-55+). Below, we outline some high-level strategies that can achieve this aim. These strategies have been used in several
industries and have generally proven to be effective.
Customers who
convert from X1
Online will receive a
discounted price
during their first 6
months of the X1
triple- or double-
play packages.
Comcast should use
their current On
Demand and other
products to
advertise for X1.
Small, unobtrusive
popups or short 15-
second ads would be
effective.
Comcast should
offer extensive
online and in-app
tutorials for X1.
These tutorials will
increase customer
retention by
enabling them to
take advantage of all
of X1’s features.
Comcast customers
will receive a
significantly
discounted month
for each customer
they refer to the X1
bundles. Each
referral must be
active for 3 months
before the discount
takes effect.
25. OVERALL X1 EXPANSION - RISKS
RISKS SOLUTIONS
1. Cannibalization of sales
Customers settling with X1 Online without buying
premium options
2. Loss of advertising revenue
CPM for online TV is about ½ of traditional Cable TV
3. Feasibility
Suggested strategy may not be entirely feasible
4. Cord cutting ends up only a fad
Consumers following the trend of internet may end up
reverting back to cable TV subscriptions
1. Targeted bundling
With effectively targeted bundles, we estimate a 15%
increase in customers across all demographic segments
2. Advertising adaptation
Online ads increase as video ads decrease to compensate
for potentially lost revenue
3. Ownership
As part-owners of Hulu and owners of NBC, Comcast will be
able to offer a discounted price for a Hulu subscription, and
the HBO subscription will be similar to the current setup
4. Continuous improvement of pay TV
Development of the current pay TV should continue
27. Enjoy the benefits of
market penetration
and prepare for the
next demographic
trend
ENJOY
Launch X1 Online
bundles across other
selected markets
LAUNCH
Begin development of
X1 Online Lite and X1
Online and determine
bundle details
DEVELOPMENT
HBO partnered with
Apple and announced
their standalone
product
HBO NOW
Review outcomes of
new programs and
make necessary
adjustments for future
expansion
EVALUATE
Launch pilot program
of X1 Online Lite and
X1 Online; emphasis
on targeting younger
demographic
PILOT PROGRAM
NEXT STEPS - TIMELINE
March 2015
Today
August 2016
March 2017
August 2018
March 2019
28. X1 revenue - $20.00 + $70.00
Variable costs (monthly)
● $16.00 - TV channels
● $5.00 - support costs
Contribution margin - $69.00
Fixed costs
● $2,000,000 - development
● $3,000,000 - monthly
Assumed market share - 15%
Yearly Profit - $3.1B
(28% of sales revenue)
Monthly revenue - $20.00
Variable costs (monthly)
● $7.77 - HBO
● $6.00 - Hulu*
Contribution margin - $6.23
Fixed costs
● $1,000,000 - development
● $200,000 - monthly
Assumed market share - 15%
Yearly Profit - $744M
(29% of sales revenue)
Additional revenue - $1.2B
Assumed penetration +20%
Additional costs
● $12.5M - referral program
*assuming 25% customers
take advantage 1 month/year
● $830M - other additional
marketing costs
Yearly Profit - $360M
(30% of sales revenue)
X1 Online Lite
PROFITABILITY ESTIMATES
X1 Online Original X1
*Comcast’s current operating income is 25.8% of revenue
29. Liz is a college student. She
doesn’t have a lot of money
but loves watching Game of
Thrones and Silicon Valley.
When deciding which service
to use, X1 Online Lite was a
clear winner.
X1 Online Lite
Leaving school to start her
new job, Liz was debating
which internet to get in her
new apartment. Because of
the cheap $15 bundle
offered by Comcast, she
chose the X1 Online bundle.
X1 Online
Image
Several years down the road, Liz
decided to upgrade to more
channels. Because she was an X1
Online subscriber, she was offered
a discounted upgrade to the X1
cable package when she moved
into her first home. She didn’t
hesitate and is now enjoying all of
the benefits of the X1 package.
X1
SUMMARY WALKTHROUGH
Meet Liz Liz loved her X1 experience
and told her neighbor all about
it. He signed up too and Liz
got her discounted month of
TV. She is now a loyal
customer and continues
watching her favorite shows.
31. APPENDIX - MARKET SIZE FOR X1 ONLINE
Demographic Est. Population
Percent that watch
TV through Internet
Market Share Number customers
Millenials 75,000,000 45% 15% 5,062,500
Gen X 75,000,000 29% 15% 3,262,500
Baby Boomers 75,000,000 17% 15% 1,912,500
Total 10,237,500
