Comcast and Walmart are discussing a deal to develop and distribute smart TVs as the cable giant “looks to become a dominant hub for streaming apps, not just TV channels,” WSJ reports.
The Discussed Terms: In exchange for pushing TV sets running Comcast software, Walmart would receive a share of recurring revenue. The sets would likely be manufactured by a third party, possibly carrying Walmart’s branding.
It’s a new wrinkle in the streaming wars. Comcast, which like many other cable providers has always been limited to its regional footprints, would use the opportunity to market to consumers nationwide and promote and push its new streaming service, Peacock.
- Walmart already has a partnership with Roku to sell TVs under the Walmart brand Onn.
Adapt or Die: Comcast’s cable TV business is crumbling, and shifting to smart TVs and streaming technology could help stabilize a piece of the company’s future. Comcast has lost around 1.2 million cable TV subscribers this year, while its broadband access business has added more than 1.4 million customers.
It’s not an easy market to penetrate for Comcast. Roku and Amazon collectively share 70% of the market for streaming-media devices. Apple is right behind them, and Alphabet is making a push with a new version of Google TV.
- Comcast does have a decades-worth of experience developing its cable set-top box software, which integrates streaming apps.
- It also already sells a streaming device called Flex using a “slimmed-down” version of that software, but Comcast executives see smart TVs as the bigger financial payoff.
Will they or won’t they? Comcast and Walmart’s discussions are still in the early stages and may not result in a deal.
This presents a chink in the armor for $ROKU’s dominance. If other players can displace Roku hardware within homes, it eats away at Roku’s long-term software and advertising growth thesis. That’s part of why I’ve been hesitant to upgrade $ROKU stock, especially at the current valuation. A safer and more-diversified way to play in the Smart TV trend is by holding $AMZN instead.