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Comcast to Boost VOD Business

Zacks Equity Research

In order to drive its Video on Demand (VOD) business, Comcast Corporation (CMCSA) – the largest cable MSO in the U.S. – is planning to roll out a promotional offer called Watchathon, which will offer free access of movies and TV shows to its subscribers for a week.

Both set-top box users and TV Everywhere platform users, which include PCs, tablets and smartphones, can easily watch their favorite movies and TV shows on demand.

Higher demand for VOD service will help Comcast to bolster its top-line growth. Moreover, it will also help the company to include another revenue platform with the addition of dynamic ad insertion technology at the time of watching TV shows. Furthermore, the new promotional offer may lure more customers to watch popular channels like HBO, Showtime and Starz.

Another step taken by Comcast to strengthen its VOD business is the introduction of popular Queue platform on its set top boxes, which was previously used through Xfinity TV apps on PCs, tablets and smartphones. Implementation of Queue application will make VOD service more interactive for its subscribers, hence giving it a lead over its peers.

In a recent survey, conducted by NPD Group Inc., Comcast holds nearly 28% of the total $1.3 billion VOD market in the U.S. in 2012. Moreover, the cable operators dominate the VOD business with 56% market share. However, it fails to compete against Verizon Communication Inc.’s (VZ) FiOS TV and AT&T, Inc.’s (T) U-Verse TV on the basis of movie-rental revenue per subscriber. Both generated $25.29 and $13.83 revenue per subscriber as compared to $10.33 for Comcast in 2012.

On the other hand, satellite TV operator DirecTV Group Inc. (DTV) and Dish Network Corp. together account for an average of just $10.33 with a combined market share of 27%.

So we believe that the implementation of these two strategies will help Comcast to retain its market share but at the same time will also help the company to realize better revenue growth from its VOD business.

Currently, Comcast Corporation carries a Zacks Rank #2 (Buy).

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