Walmart CEO Doug McMillon on putting tech to work in retail.
Comcast Corp. is in talks with Walmart Inc. to develop and distribute smart TVs, according to people familiar with the matter, as the cable giant looks to become a dominant hub for streaming apps, not just TV channels.
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Under the terms the companies are discussing, retail giant Walmart would promote TV sets running Comcast software, and would get a share of recurring revenue from Comcast in return, the sources said. A third party would likely manufacture the sets, and one possibility is that they could carry Walmart branding, they said.
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The Comcast software, drawing on expertise the company has developed and technology it has acquired, would aim to help consumers navigate through their streaming apps and watch programming. That would put Comcast up against tech companies that are already the major players in streaming, like Apple TV maker Apple Inc., Fire TV maker Amazon.com Inc. and Roku Inc.
The strategy would enable Comcast to market to consumers nationwide, a change in a U.S. cable industry where players have stuck for decades to their regional footprints. And Comcast would be able to promote its new streaming service, Peacock, front and center in the smart TVs, sources said.
Walmart, a dominant seller of TV sets, already has a partnership with Roku to sell smart TVs under the Walmart brand Onn.
The Comcast talks with Walmart are at an early stage and may not result in a pact, people familiar with the talks said.
A Comcast spokeswoman declined to comment.
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“We’re constantly having conversations with current and new suppliers about innovation and new products we can bring to our customers, and we don’t share details of those discussions,” said Ryan Peterson, vice president of electronics at Walmart U.S.
Comcast Chief Executive Brian Roberts said at a conference in September that Comcast has its sights set on developing smart TVs “on a global basis.” Mr. Roberts didn’t discuss any specific deals or timing.
Focusing on smart TVs and streaming technology could help Comcast move beyond its eroding traditional cable TV business, which continues to lose subscribers as households cut the cord. So far this year, the company has lost nearly 1.2 million cable TV subscribers. Its broadband access business, meanwhile, has surged, even during the coronavirus pandemic, adding more than 1.4 million customers.
Comcast is under scrutiny from activist investor Trian Fund Management LP, which recently took a stake in the company. It isn’t clear what Trian wants, beyond its belief that Comcast shares are undervalued.
Comcast is fairly late to the game in the distribution of streaming apps. Roku and Amazon together have a roughly 70% share of the U.S. market for streaming-media devices, with Apple in third place, according to research firm Parks Associates. Alphabet Inc. has recently launched a new play for the market with Google TV, a version of its Chromecast technology that will come with a remote control, so users won’t have to cast programming from their phone to their TV.
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Comcast believes it is in a strong position to compete, given investments it has made in cable technology in recent years, and the vast movie and TV assets the company has under its NBCUniversal umbrella.
Comcast has spent nearly a decade developing the software behind its advanced X1 cable set-top box, which was meant to move beyond the basic channel menus consumers have seen for years. It integrates streaming apps, so viewers can toggle between those and channels, and a voice remote allows consumers to search through programming.
The X1, which is licensed by some other cable providers, could be the road map for the software Comcast would put on smart TVs, Mr. Roberts said last month.
Comcast already sells Flex streaming devices powered by a slimmed-down version of its X1 software. Those devices, similar to an Apple TV or Roku, are available for free to broadband-only Comcast customers. Flex’s monthly active user base is over one million Comcast subscribers, Mr. Roberts said on an earnings call last week.
Still, Comcast executives believe Flex has a limited financial payoff and think the company can earn higher profit margins in the long run by embedding software directly into TVs, one of the people familiar with the matter said. The company has said publicly Flex “increases the lifetime value” of its broadband customers, and also now contributes to Peacock’s growth.
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Comcast also has been making acquisitions, many without much fanfare, to bolster its technology and enable it to expand its offerings nationwide. In 2017, it acquired Watchwith, an operator of cloud-based metadata, search and recommendation technology, adopting some of its features for X1. Last year, Comcast bought Dutch company Metrological, which had already helped integrate Netflix Inc. and other streaming services onto the X1 box.
Earlier this year, the cable giant bought Xumo LLC, an ad-supported video service. Xumo, which repackages traditional TV content into new digital channels, is used by LG Electronics Inc. in its smart TVs. Xumo features will likely be integrated into the smart TV operating software Comcast develops.
Comcast’s $39 billion buyout of European pay TV giant Sky also provided some of the technology used in its U.S. products.
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