X1, the Comcast video system that was supposed to save the pay TV industry with its voice remote and other advanced technology features, is on the ropes.
Comcast, the leading U.S. pay TV operator, lost nearly 1.5 million residential linear pay TV subscribers in 2021, almost 8% of its customer base, ending the year with just 17.5 million residential video users.
Also read: Comcast To Double Programming Spending on Peacock to $3 Billion
The losses are accelerating. The cable company bled 349,000 video subscribers in the fourth quarter, vs. just 227,000 in Q4 2020. Comcast isn't bleeding money on video at this point -- its video revenue was down just 1.2% in Q4 to $5.4 billion.
But while somewhat anticipated, the quickened erosion of the one of the cable company's core assets still has consequences.
Cord-cutting, of course, is now an accepted fact among the telecom companies that supply linear video services. Comcast, which added more than 1.2 million residential high-speed internet users in Q4, has for several years offered free of charge its "Xfinity Flex" thin-client video option to its growing ranks of internet-only customers. Flex provides these users access to popular OTT services including Netflix and Comcast's own Peacock, while keeping their video activities on Comcast's managed network.
Also read: Has Peacock Found Momentum? It Was No. 2 in Signups for Q4
And Comcast is also exploring the expansion of the core X1 experience beyond its footprint, featuring it an OS called "XClass TV" that is now being sold in Hisense smart TVs sold at retail.
Maintaining control of the Xfinity-branding operating system environment, regardless of its iteration, is crucial for Comcast, given that most of the users of its forward-looking video priority -- streaming service Peacock -- are monetized through advanced ad sales. And Comcast makes more money on advertising impressions within the Xfinity X1, Flex and XClass TV environments that it does, say, on a third-party platform like Roku.
But for Comcast, the real meat of its Peacock platform control still comes via its X1-equipped linear pay TV subscribers. According to figures released during Comcast's Q4 earnings call Thursday, 7 million of the 24.5 million Peacock active users are those who receive access to Peacock Premium through their Comcast Cable video subscription.
Undoubtedly, members of that subset will continue to ditch X1 and the full pay TV experience, downgrading to Flex and Comcast Xfinity Internet -- which is OK with Comcast longterm, as long as they keep using Peacock.
Some of those users, however, are lost from the Xfinity ecosystem, and that is a concern.
