Does Verizon Have A Shot At Success In The Streaming TV Market?
Verizon’s (NYSE:VZ) CEO recently indicated that the carrier plans to launch its own over-the-top (OTT) streaming TV service later this year. The move is not surprising, as video has been a major theme in the wireless business for some time now. Carriers have been looking to leverage the increasing shift of consumer media habits away from traditional media to mobile devices, while creating more compelling use-cases for their upcoming 5G networks, which will enable more seamless video delivery. Below we take a look at some of the challenges and opportunities Verizon could see as it looks to enter the small but growing market.
We have a price estimate of $53 for Verizon’s stock, which is about 15% ahead of the current market price.
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Risks: Strong Competition And Verizon’s Mixed Media Track Record
The nascent streaming TV market is already quite crowded, with major pay TV companies as well as technology firms vying for share. For instance, YouTube TV is banking on Google’s tech muscle (cloud DVR, AI-powered search and recommendation system) and its sizable Android platform to win over customers. Apple is also widely expected to enter the market, leveraging its sizable iOS user base. Verizon’s rival AT&T entered the market late last year with DirecTV Now, banking on relatively attractive content deals. However, the product has apparently been slow to gain momentum, with growth reportedly stalling shortly after the initial promo period. This could raise some questions regarding the viability of Verizon’s entry into the market. The company’s track record in the media space has been somewhat mixed. The go90 over-the-top video app that it launched in late 2015 hasn’t been very successful, despite well-reviewed original content offerings. Moreover, the carrier could lack bargaining leverage with content providers, given its smaller exposure to the U.S. pay TV market. Its FiOS IPTV service has under 5 million customers, compared to AT&T’s ~25 million pay TV subscribers.
Opportunities: Video Advertising Tech And Original Content Could Help Verizon
Verizon has been making a concerted push into the mobile advertising and video markets over the last two years, investing in Internet TV providers (OnCue), content delivery networks (Edgecast) and advertising technology providers (AOL). The carrier could potentially deploy some of these technologies into its streaming TV foray. Verizon also has a vast library of original video content, on account of assets such as AOL and the go90, and this could get bigger with its acquisition of Yahoo, which is expected to close next month. The company could potentially bundle this content with the live TV offering, allowing it to offer some differentiation over other players who do not offer original content. Verizon could find a way to also bundle its NFL live game videos (it currently holds mobile rights for NFL) into the mobile app of the TV service. The carrier will can also cross sell the offering to its existing 110 million+ wireless subscribers, offering discounts for wireless and streaming TV bundles. This could help to improve stickiness as well as overall ARPU.
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