Comcast recently paid an undisclosed sum for OneTwoSee, a real-time sports analytics service which displays game and player stats on the screen and companion apps during live games. Comcast plans to integrate the service directly into its X1 set-top boxes, which already merge live TV, on-demand programming, DVR recordings, streaming content, and other apps into a single platform.
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OneTwoSee's current customer base includes majormedia companies like Comcast, Fox Sports, Tribune Media, Verizon's AOL, and Rogers Cable in Canada. The service is already used on NFL, MLB, NBA, CFL, and NCAA games, and the service will launch soon for professional soccer and NHL games in the near future. The service will also be used to cover this summer's Olympics in Brazil, which will be broadcast on Comcast's NBC.
How does this help Comcast?
Comcast added 1.1 million X1 customers last quarter, a 73% increase from a year earlier. It also notes that X1 customers now account for about 30% of its total video customer base. Comcast expects that percentage to rise to 50% by the end of the year. Comcast's total video revenue rose 4.4% annually last quarter, accounting for 45% of its cable communications revenue and 28% of Comcast's top line.
Comcast is using X1 to counter the rise of cord cutting, where customers are ditching cable packages for streaming only services like Netflix . In addition to bundling more Internet features than older set-top boxes, X1 boxes offer live sports -- something which streaming services still can't offer. By buying OneTwoSee, Comcast widens its live sports moat against streaming competitors and enables it to profit from rivals like Fox, although the revenue boost probably wouldn't be substantial. Comcast might even stop offering OneTwoSee's service to those rivals altogether to gain a competitive edge in live sports.
Another way Comcast is promoting X1 to the cord-cutting crowd is through a partnership withTwitter's (NYSE: TWTR) Vine, which hires top Vine stars to promote X1 with six-second video loops. Since Twitter is already frequently used at live sporting events, Comcast could also potentially integrate Twitter's tweets and data feed with OneTwoSee to enhance its game and player data with social-bases stats.
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Facebook also recently launched Sports Stadium, a live stream to experience ongoing games with friends. Since X1 already offers a Facebook app, Comcast could also potentially partner with Facebook to integrate Sports Stadium features into OneTwoSee.
Will this protect Comcast from Netflix?
While it's tempting to think that Comcast has found a great way to hold Netflix at bay, Disney's recent declines in ESPN subscribers reveal that not even live sports aren't a bulletproof defense against cord-cutters. That's surprising, since research firm Mintel recently reported that half of Americans are football fans, while over 30% are baseball and basketball fans.
Netflix is well aware that its lack of live sports is a potential Achilles' heel. During a media conference in New York last December, Netflix content chief Ted Sarandos declared that the company would only consider expanding into live sports broadcasts if it created and owned the event itself. As an example, Sarandos cited Disney's development of the X Games for ESPN. That statement wasn't surprising, since content acquisition costs remain Netflix's top expense and the price of sports programming contracts have surged overthe past few years.
The X Games in Aspen. Source: ESPN.
Although Netflix, Disney, and other media companies believe that first-party sports programming might attract some viewers, their own sporting events won't likely replace the NFL, NBA, or MLB anytime soon. This means that the leagues will likely retain pricing power in programming fee negotiations for the foreseeable future. This means that live sports is a double-edged sword for Comcast -- it gives its X1 and cable bundles an advantage over Netflix, but they're also expected to boost its programming costs by10% this year.
The key takeaway
On its own, Comcast's acquisition of OneTwoSee probably won't move the needle much for its video business. However, it casts an interesting spotlight on how the company is strengthening its X1 business and widening its defensive moat against live sports and streaming competitors. It also highlights how the popularity of sports can be both a blessing and a curse for both cable and streaming companies.
The article Comcast Corporation Buys A Real-Time Sports Analytics Firm originally appeared on Fool.com.
Leo Sun owns shares of Verizon Communications and Walt Disney. The Motley Fool owns shares of and recommends Facebook, Netflix, Twitter, and Walt Disney. The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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