March 23, 2005
Tivo/Comcast Deal from Comcast's Perspective
According to Macke the churn rate for DirecTV/TiVo users is .2% per month. "That's one full percentage point lower than the levels of churn for Comcast DVR
customers (to take one example and please note that this rate isn’t stated
openly by Comcast or any other cable cos… but it can be worked out from the
information they do give)."
Macke does some back of the envelope math and concludes that by reducing churn 1% that Comcast would save about $60 million per month – that's a lot of dough.
I think there were probably many reasons why this deal made sense for Comcast, but if it is accurate that customer acquistion costs are $800 for Comcast, keeping those customers without dropping rates is a key concern. It's no wonder that Comcast gives away free its OnDemand VOD service, something that gives cable operators an advantage over satellite. As long as you keep writing those digital cable checks each month and don't switch services, Comcast is happy. If it takes Tivo-lite to reduce that chance of switching, it's a small overall price to pay.
Posted on March 23, 2005
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Your analysis is directionally correct and some of your calculations, too. However, churn is a function of many factors, not just whether TiVo DVR service is available. In other words, TiVo cannot create a 1% churn reduction gap all by itself.
Comcast will offer both DVR services to the customer, allowing those that are willing to pay the extra TiVo fees to receive it.
Posted by: Martino Mingione at June 17, 2005 06:41 PM