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STRATEGIC BUSINESS PLANOverview

February 2016

NICK KERRInformation 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 GILLESPIEAccounting

Experienced with technology startups and venture capital

2nd place winner of Google Fiber Case Competition

Ranked 5th nationally in Spikeball

BRADEN ANDRUSAccounting

BRADY CHAMBERSAccounting

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

AGENDA

1 EXECUTIVE SUMMARY

2 CASE BACKGROUND

3 STRATEGY SUMMARY

4 XFINITY X1 EXPANSION

5 SUMMARY & CONCLUSION

Problem Overview

Our Methodology

Strategy Overview

Targeting Demographics

X1 Online LiteX1 OnlineExpand original X1Implementation

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.

CASE BACKGROUND

A QUICK LOOK: COMCAST’S CURRENT SITUATION

A quick look at

41 million subscribers

4.9billion dollars in revenue

6%

19

Annual growth rate

2014 Emmy Awards

Emerging Competition

21.7 40% $1.56million subscribers of Comcast customers

use HBObillion 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

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

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

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

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:

STRATEGY SUMMARY

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

• 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



• “Hate group”

GOAL FOR SEGMENT

• Use internet trend in Comcast’s favor and penetrate with X1 Online Lite bundle

• Ages 55+



• “Love group”

GOAL FOR SEGMENT

• Increase the quantity who upgrade to the current X1 cable package

Generation X Baby BoomersMillenials

CUSTOMER SEGMENTS

X1 ONLINE LITE

Millenials

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 NBCOn 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

“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.

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 BComcast TV

Revenue

Potential loss to HBO now:

X1 ONLINE

Generation X

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

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.

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

EXPANDING XFINITY X1

Baby Boomers

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

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.

OVERALL X1 EXPANSION - RISKS

RISKS SOLUTIONS

1. Cannibalization of salesCustomers 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 fadConsumers following the trend of internet may end up reverting back to cable TV subscriptions

1. Targeted bundlingWith effectively targeted bundles, we estimate a 15% increase in customers across all demographic segments

2. Advertising adaptationOnline ads increase as video ads decrease to compensate for potentially lost revenue

3. OwnershipAs 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

NEXT STEPS

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

X1 revenue - $20.00 + $70.00Variable costs (monthly)● $16.00 - TV channels● $5.00 - support costsContribution margin - $69.00Fixed costs ● $2,000,000 - development● $3,000,000 - monthlyAssumed 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 - $6.23Fixed costs● $1,000,000 - development● $200,000 - monthlyAssumed market share - 15%

Yearly Profit - $744M(29% of sales revenue)

Additional revenue - $1.2BAssumed 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

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.

QUESTIONS

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

END OF APPENDIX

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