The document proposes a partnership between Comcast and Microsoft to launch a lower-cost "Comcast Xbox Lite" device to expand Comcast's offerings beyond cable TV and compete in the growing market for internet-based TV services. A SWOT analysis identifies Microsoft's strengths in existing Xbox users and infrastructure, but also weaknesses in failing to capitalize on previous opportunities in the living room. The proposal analyzes risks, recommends a phased implementation plan, and projects strong financial returns with an estimated NPV of $170 million.
2. Winning the battle for the
living room with
Comcast Xbox Lite Device
NPV: $170,444,840.16
Analysis Implementation
Recommendation Financials
3. Market Analysis
COMCAST
22.1 M Subscribers
TIME WARNER
12.5 M Subscribers
COX COMM.
4.6 M Subscribers
• US TV Household:
112.2 M
• Cable Subscribers:
73 M
• Cable TV
Penetration: 58%
• Annual Cable
Revenues: $75 Bn
Analysis Recommendation Implementation Financials
4. Demand Factors
5.7%
6.6% PPV & VOD
Equipment
Household Disposable Income Rentals
• Median Income: $54,929
• Elasticity: 1.95
• Substitutes: Satellite Services,
over-the-air TV broadcast, internet-
based video broadcast
Digital Enhancement
• Quality of Cable TV transmissions
• Interactive TV
• Video-On-Demand
• Competition: 3D TVs, Smart TVs
Bundled Packages 56.8%
30.9%
• Basic & Premium Basic Cable
Premium
Packages
• Pricing Cable
Packages
Analysis Recommendation Implementation Financials
5. Strategy Criteria
Capital Growth
Expenditure Potential
Existing Personalized
Synergy Entertainment
Analysis Recommendation Implementation Financials
6. Short-Term Recommendation
Expand upon current relationship with Comcast
• ―Comcast will be the company to look to first for the communications products and
services that connect people to what's important in their lives.‖
Pitch a ―TV Entertainment‖ addition to broadband service.
• Assist Comcast in dealing with FCC pressure to offer stand-alone broadband service.
• Create a viable alternative for internet-only customers for Netflix and HULU.
Analysis Recommendation Implementation Financials
7. Long-Term: Comcast Xbox
Brand
Comcast insignia with
an appearance for the
“powered by Xbox”
marketing.
Technology
• Working off existing PowerPC platform.
• Pared down in terms of gaming capability.
• Improved to include DVR and Skype capability.
User Interface
• Sleek interface incorporating Windows 8 “Metro” design
• Increased personalization (Recommendation Engine) and Xbox SmartGlass
for Windows phone and Surface Tablet
Analysis Recommendation Implementation Financials
8. Risks & Mitigations
New Product & Market Comcast Existing Sales
Entry Force
• Struggle with Sales, Distribution Channels • Approach Comcast current subscribers first
• Highly competitive environment and gain market share from there
Intimidate Non-Gamer Targeted Cable TV Ads &
Consumers Customer Satisfaction Survey
• Xbox label to the product • Market it as Comcast Product as they are
• Already own a set-top box more familiar with Comcast product offerings
Low Interest from Xbox Xbox Quality & Comcast
Owners Equipment Rental
• Customer trust on Xbox quality (for gamers)
will outweigh this risk
• Comcast Xbox device is available for rental
Analysis Recommendation Implementation Financials
9. Implementation
Introduce
Service
Establish through
existing Xbox Launch Nation Global
Comcast
owners Device Saturation Expansion
Partnership
Q1 Q2 Q3 Q4 Y2
Seek
Contract Targeted Ads Heavy
Re-evaluate alternative
Exclusivity & Survey Marketing
partners
Bundled Increase Use Comcast Seek
Pricing Comcast Sales alternative
Details Xbox R&D Channels partners
Analysis Recommendation Implementation Financials
10. Financials: Revenue Sharing
YEAR 1
Current*: $182.48
• XFINITY
• Sports Package
• HBO Go
• Internet
• Xbox Live
*Lynwood, WA (Nov. 2012)
YEAR 2- YEAR 5 New: $144.11*
• Same offerings
*Year 2 ++ with Xbox Bundle
SAVINGS: $38.37
*Rental Sharing: 80%, Subscription Sharing: 70%
Analysis Recommendation Implementation Financials
11. Financials: Worst Case
NPV: $35,448,427.02
Assumptions
Expenses as Percent of Total Revenue : 61%
Corporate Rate Used, Year 1 : 35%
Corporate Rate Used, 2-5 : 39%
WACC Microsoft : 9%
Analysis Recommendation Implementation Financials
12. Financials: Best Case
NPV: $170,444,840.16
Assumptions
Expenses as Percent of Total Revenue : 61%
Corporate Rate Used, Year 1 : 35%
Corporate Rate Used, 2-5 : 39%
WACC Microsoft : 9%
Analysis Recommendation Implementation Financials
14. Appendix
Presentation • Xbox 360 TV& Entertainment Global Footprints
• Market Analysis
• Demand Factors Comcast
• Strategy Criteria • Why Comcast?
• Short-Term Recommendation • FCC & Comcast: Stand-Alone Broadband
• Long-Term: Comcast Xbox • Comcast & Verizon FiOS
• Risks & Mitigations • Comcast Demand Factor: Bundled Packages
• Implementation • Comcast Demand Factor: Phone Service
• Financials: Best Case • Comcast Demand Factor: Phone Service
• Financials: Worst Case • Comcast Demand Factor: High Speed Internet
• Financials: Revenue Sharing • Comcast Demand Factor: Additional Services
• Comcast Demand Factor: Digital Enhancement
Market Analysis • Cable TV Industry Lifecycle
• Global Market Analysis
• Market Analysis: Canada & UK Frameworks
• Country Attractiveness: Weighted Ratings • SWOT Analysis
• Country Attractiveness: Detailed • BCG Matrix: Microsoft Products
• Market Expansion Grid
Financials • Alternative Decision Matrix
• Year 1 & 2 (Detailed) • Stakeholders Analysis
• Year 3 - 5 (Detailed) • 5Cs Analysis
• Comcast Billing
Additional Research
Microsoft & Xbox • Leveraging Existing Technologies
• Market Share: Microsoft Products • ThinkAnalytics Recommendation Engine
• Xbox Existing Partners (USA) • HD Voice
• Xbox Existing Partners (Global) • Targeted Cable TV Ads: Comcast Spotlight
Analysis Recommendation Implementation Financials
15. Global Market Analysis
2014: 785 Million fixed broadband connections around the world (50% of
TV households).
2016: 352.4 Million individuals pay access to OTT internet TV
programming (50% of the worldwide total of Pay-TV subscriptions:
cable, satellite and IPTV combined).
By 2017, Global Market for Internet TV to Reach $81.2 Billion
16. Market Analysis: Canada & UK
CANADA U.K.
Cable Subscribers 9 Million 12.8 Million
GDP per Capita $ 50,496 $ 39,604
Cable Providers Shaw, Rogers, Bell & Virgin Media, Small
Videotron World, WightFibre
Market Potential High High
Existing Cable TV Yes Yes
Partner with Microsoft?
17. Country Attractiveness: Weighted Ratings
Argentina
Brazil
Spain
GDP/
Capita
4.4
2.9
8.1
Internet
Penetration
6.7
3.9
6.7
?
Market
Potential
8.1
7.0
8.3
Competitive
Index
2.9
7.3
3.1
Total
5.8
5.2
6.7
Germany 9.8 8.3 8.4 4.7 7.9
France 8.7 8.0 8.9 4.3 7.6
United
Kingdom 8.9 8.4 8.4 5.1 7.8
Italy 8.2 5.8 8.6 5.0 6.8
WEIGHTS MARKET POTENTIAL COMPETITIVE INDEX
• GDP/Capita: 0.2 • Online Video Viewers (%) • Regulatory Restrictiveness
• Internet Penetration: 0.35 • Discretionary Incomes Index
• Market Potential: 0.25 • Current Cable Providers
• Competitive Index: 5.0 (Available Partners)
18. Country Attractiveness: Detailed
Online Video Users Points (10 for 100%) Regulatory
Points (10 for 0)
Argentina 0.99 9.9 Restrictiveness
?
Brazil 0.97 9.7 Argentina 3.8 6.2
Spain 0.94 9.4 Brazil 8.6 1.4
Germany 0.88 8.8 Spain 2.1 7.9
France 0.86 8.6 Germany 2.3 7.7
United Kingdom 0.91 9.1 France 4.5 5.5
Italy 0.94 9.4 United Kingdom 6.1 3.9
Italy 5 5
Discretionary
Points (10 for 55000)
Income Cable Providers Points (10 for 10)
Argentina 29061 5.3 Argentina 2 2
Brazil 16373 3.0 Brazil 6 6
Spain 36143 6.6 Spain 4 4
Germany 42610 7.7 Germany 7 7
France 50862 9.2 France 4 4
United Kingdom 39987 7.3 United Kingdom 4 4
Italy 41013 7.5 Italy 5 5
GDP/Capita (PPP) Points (10 for 40000) Internet Penetration Points (10 for 100%)
Argentina 17674 4.4 Argentina 67 6.7
Brazil 11719 2.9 Brazil 39 3.9
Spain 32424 8.1 Spain 67.2 6.7
Germany 39211 9.8 Germany 83 8.3
France 34993 8.7 France 79.6 8.0
United Kingdom 35494 8.8 United Kingdom 83.6 8.4
Italy 32928 8.2 Italy 58.4 5.8
19. Year 1 & 2 (Detailed)
YEAR 1
?
*Current Xbox Subscribers: 40,000,000
YEAR 2
*Current Cable Subscribers: 22,220,000
20. Year 3 - 5 (Detailed)
YEAR 3
*Current Cable Subscribers: 22,442,200
YEAR 4
?
*Current Cable Subscribers: 22,666,622
YEAR 5
*Current Cable Subscribers: 22,893,288
23. Xbox Existing Partners (USA)
• Paramount • NBA Game Time • CinemaNow
• ESPN • Netflix • Amazon Instant
• XFINITY • NBC News Video
(Comcast) • MLB.tv • Hulu Plus
• VUDU • HBO GO • IGN
• TODAY • FOX • SyFy
• Verizon FiOS TV • GameSpot TV
24. Xbox Existing Partners (Global)
Country Partners
Australia ABC iView, SBS On Demand, FOXTEL, Crackle
Canada UFC, VEVO, TELUS, Rogers On Demand, Netflix, Astral Media‘s
Disney XD, Maple Leaf Sports & Entertainment/Real Sports , Crackle,
MSN with MSNBC.com
France AlloCiné , Canal+, MSN with MSNBC.com, MUZU.TV
Germany ZDF, LOVEFiLM, Filmstarts, MUZU.TV, MSN with MSNBC.com
Italy Mediaset, MUZU.TV
Japan Hulu, MSN with MSNBC.com
Mexico Televisa, MSN with MSNBC.com
Portugal Vodafone Portugal
Russia VimpelCom
Spain Sensacine , Telefonica, GolTV, Canal+, Antena 3, RTVE, MUZU.TV,
MSN with MSNBC.com
UK VEVO, Screenrush, LOVEFiLM, Last.fm, Channel 4, Channel 5, BBC,
blinkbox, BSkyB, Crackle, MSN with MSNBC.com , MUZU.TV
26. Why Comcast?
Comcast is currently under Comcast is seeking ways to make
pressure from the FCC to a premium for data usage.
offer a stand-alone Internet
service. This may be a
Comcast may seek to have the
good intermediate offering.
same relationship/functionality with
Microsoft that Verizon FiOS has.
Comcast faces continued A relationship is currently in place
pressure from Netflix and for offering Comcast‘s XFINITY
HULU. video service.
Comcast doesn‘t want to get Set-top box conversation has been
‗Appled‘ – they‘d be initiated by Microsoft already
interested in a Apple TV
competitor
27. FCC & Comcast: Stand-Alone Broadband
“Comcast pays $800,000 to U.S. for hiding
stand-alone broadband”
Conclusion: Because as part of the NBC-
Universal transaction the FCC gave
Comcast several conditions including
providing and marketing a reasonably-priced
stand-alone Internet Comcast may be more
open to On-line video content partnerships.
28. Comcast & Verizon FiOS
Internet Subscribers 18 M 5.1 M
Cable Subscribers 22 M 4.5 M
Average Cable Bill $ 137.51 $ 109.99*
Average Broadband Bill $ 70.00 $ 79.99
*Combined with broadband
29. Comcast Demand Factor: Bundled Packages
Additional Products: Triple Play Power RGU Growth
34. Cable TV Industry Lifecycle
MATURE
? Life Cycle Reasons
• There is a high
penetration of
households with
basic cable
• Digital cable services
are experiencing new
growth
• Bundled services are
growing. These
services include
telephony, high-
speed internet, and
video services.
35. SWOT Analysis
STRENGTHS WEAKNESSES
Already has a foot in the living room with the Have failed considerably using the fast follower
popular Xbox strategy before (Zune, Kin)
Xbox Live, Gold allows users access to digitally Current living room device, Xbox, only appeals to
distributed entertainment the younger gaming generation
Xbox Live has the potential to become the No stand-alone set-top box or smartTV in the
best, most comprehensive entertainment system product line, which are currently selling at a much
in the world faster rate than gaming consoles
Have proven they be successful following a fast
follower strategy (Kinect)
Xbox pricing ($99 with a 2 year contract to Xbox
Live) is much cheaper than other consoles
OPPORTUNITIES THREATS
New Xfinity partnership could pave the way to a Internet connected TVs and set-top box sales
Microsoft set-top box growing at a much faster rate than game console
No revolutionary ―ICE‖ device has been sales
introduced yet. Opportunity to change the entire Lots of competitors seeking to dominate the living
living room experience up for grabs room space as well
New SmartGlass App has opportunity to bridge Gaming audience could object to product being
the gap between Xbox and mobile devices marketed as a family-centered device
Newly acquired Skype on Xbox could make the Currently there are several cheaper set-top box
console morel appealing as a set-top box options compared to Xbox, like Apple TV, Roku
36. BCG Matrix: Microsoft Products
• Smartphones and tablets are
rapidly growing; however,
Windows
?
Market Growth
Phone Skype
Windows Phone and Surface
market share is still low Surface Bing
• Skye and Bing has successfully
$
secure some market share in the
IM and Search Engine market
• Xbox, Windows and Office have
high market share in the Xbox
entertainment and OS market Kin Windows
Zune Office
Market Share
37. Market Expansion Grid
Existing Product New Product
Existing Market
• Existing Xbox with current
offerings • New Xbox Device
• Comcast Set-Top Box
New Market
• Existing Xbox with powered by Xbox
Comcast partnership • Microsoft SmartTv
• Microsoft Set-Top Box
38. Alternative Decision Matrix
Status Quo New Set-Top New Set-Top Acquire other Manufacture
?
Box & Box without set-top box SmartTV
Comcast Partnership manufacturer
Partnership
Long Term 0 + 0 + 0
Investment
Growth - + + + 0
Potential
Innovation 0 0 + 0 0
Collaboration 0 + - 0 +
Customer - + + + +
Demand
New market 0 + + + +
Entry
Total -2 5 3 4 3
39. Stakeholders Analysis
?
Name Role Interests
Microsoft Company we are Company growth by
advising having a new product
in the growing internet
TV market
Comcast Microsoft‘s business Earn more profits by
partner target entering into the
internet TV market
with a company like
Microsoft
Competitors Other companies in Earn maximum profits
the internet TV market for themselves while
minimizing Microsoft‘s
profits
40. 5Cs Analysis
The question Microsoft faces is whether it is doing enough to gain a strong presence in the living
Context room. There are several competitors including Apple and Google, with several smart TV‘s also
considered as competitors. Is the Xbox brand and console the answer to winning over the living
room space?
There is Apple TV, Google‘s Nexus Q, Roku, Sonos. Also several Smart TV brands like Samsung
Competitors and Sony, as smart TV‘s are expected to triple their presence in living rooms over the next 3
years. Microsoft also needs to think of cable/internet providers as competitors as well,
considering they have set-top boxes in most living rooms in America. Microsoft also has to worry
about Nintendo and PS3, whose console sales are quite comparable to Xbox. The highly
lucrative and competitive gaming market could object to the Xbox being marketed as a family-
centered device in the living room.
Microsoft has a big presence in the living room already, being one of the best-selling consoles of
Customers all time. The new Xbox Kinect attracted even more customers who favored the motion-sensing
technology. But as the battle for the living room evolves, so will the customers and their needs as
well.
The possibility of a partnership with a cable company such as Comcast is intriguing. The idea of
Collaborators Comcast offering a Microsoft-braded set-top box could be beneficial to both companies.
Microsoft‘s presence thus far in the living room has centered on its game console the Xbox 360.
Company They have added several features to it, including the ability to stream content like Netflix,
XFINITY, and HBO. Skype will be added as an Xbox feature in 2013. Xbox LIVE gives gamers
the opportunity to interact and compete with others is an industry-leading experience. All these
features are a big step towards the ―connected living room‖ for Microsoft.
41. Leveraging Existing Technologies
• DVR Patent
http://www.nbcnews.com/technology/ingame/patent-points-potential-dvr-feature-xbox-118127
• Skype (on Xbox 2013)
http://www.slashgear.com/skype-for-xbox-360-unlikely-until-2013-29230596/
• XFINITY via Xbox Live
http://xfinity.comcast.net/slideshow/news-xfinitysurprisefacts/4/
• Microsoft Hardware
• Cable Connectivity (FiOS)
http://www.engadget.com/2011/11/29/verizon-details-live-fios-tv-service-for-xbox-360-kinect-contro/
• Kinect
• Windows Phone
• USB
• Xbox SmartGlass
http://www.xbox.com/en-US/smartglass
42. ThinkAnalytics Recommendation Engine
?
"Our ability to build multiple profiles per set-top box allows us to have
unique recommendations for each person in a household. Bringing
together live TV metadata with set-top box viewing histories, combined with
Mediaroom TV services, delivers very compelling and richer discovery and
recommendations results for any video-enabled device."
• Definition: • Market Penetration: 20% to 50%
Discovery and recommendation of target audience
technologies are designed to • Maturity: Early mainstream
provide content listings to • Sample Vendors: Jinni; Motorola
customers of online media services Mobility; Red Bee Media; Rovi; The
— or, increasingly, hybrid Echo Nest; ThinkAnalytics
broadcast/Internet TV services.
• Benefit Rating: High
43. HD Voice
?
―What sets Comcast apart from other players in this space is that we‘re the
only provider to combine a cloud-based voice service with vast network
reach, a well-known brand and a strong focus on providing great products
with high quality and consistency,‖
• Definition: • Market Penetration: 1% to 5% of
Also known as wideband voice, HD target audience
Voice‘s major advantage is the • Maturity: Emerging
ability to communicate with clearer • Sample
audio and have improved and more Vendors: Cisco, Ericsson, HTC, No
tangible conversations over fixed kia, Polycom, Texas Instrument
line, cellular networks and VoIP
• Benefit Rating: Moderate
44. Targeted Cable TV Ads: Comcast Spotlight
ROI DRIVEN
Spot cable allows you to
master the changing TV
marketplace FEATURES
MARKET FOCUSED • Geographic Targeting: specific area
• Demographic Targeting: specific audiences with
Ability to select the right their own individual interests
networks, dayparts and
• AdTag & AdCopy
programs for your brand in
every market – segment market and customize spots
– Geographic tagging with different message
ADAPTABLE • i-Guide Banners
– High visibility
Deliver consumer reach and – Available to 10 M Comcast Digital Cable
effective frequency Subscribers
• XFINITY.com
• Comcast Digital Entertainment
Notas del editor
Good morning! Thank you for taking your valuable time today to be here. I’m Jessica, this is michael, alica, joel and we are living room consulting.
Our objective today, is for Microsoft to win the battle for the living room using Comcast Xbox Lite Device. By the end of this presentation, we’ll show you that this recommendation will generate NPV of $170 million . We will walk you through our analysis, recommendation, implementation and financials. And next, Michael will talk more about the analysis.
Thank you Alica. So you have heard our short term and long term recommendations. These are the risk involved if you follow our recommendations. Obviously it’s a new product and a new market entry. In the beginning, you will be struggling with sales, distribution channels and gaining market share in this highly competitive environment. Non-gamer consumers will be quite intimidated with the XBOX label to the product, while current xbox owner might not be interested in purchasing one.To mitigate the first risk, we suggest Microsoft to utilize comcast existing sales force to sell the product. Comcast has 20 million subscriber, use that to start strong and be competitive in the market. For non-gamer consumers, we believe that they are more familiar with Comcast brand and product, so we suggest microsoft to market this new device as a comcast product. Targeted cable tv ads, which can be done through Comcast Spotlight, will help promoting the device to the right demographics. Finally, for the last risk, we believe in gamers trust on xbox quality and brand loyalty will outweigh the risk. But in addition to that, We also suggest for Microsoft and comcast to make this device available for rental so that consumers can test it out before purchasing.RisksNew Products & Market Entrywill struggle with sales, distribution channels Mitigation: Use Comcast existing distribution channels; approach current subscribers – better offering at deal priceIntimidate Non-Gamer Consumersbecause of the Xbox label to it Mitigation: Market it as Comcast product, just like the one they have at their home now. Non-gamers are more familiar with Comcast. Targeted Ads on HuluLow interest from Xbox owners Mitigation: Customer trust in the device powered by Xbox will outweigh this risk. Gamers are more familiar with Xbox
The implementation goes from quarter 1 to year 2 and beyond.It is crucial in the first quarter to establish partnership with comcast. Once that is done, Microsoft then can introduce the service through xbox owners. Accompany the introduction with targeted ads about the new device that will launch on the third quarter. Like I mentioned earlier, we suggest microsoft to use comcast existing sales force to start strong. By quarter four, we expect to gain nation saturation and this is a great time to re-evaluate the year’s progress. Finally for year 2 and beyond, this device will be released globally starting from the countries that already have existing Cable TV partnership with Xbox, such as Canada, UK, Germany, Spain, France and Italy. Next, Joel will tell you more about the financials