At CES, the big consumer electronics show underway this week in Las Vegas (when the lights are working), TechCrunch has learned that Verizon is working away on a couple of new services that will see the carrier once again trying to grow its business beyond basic broadband and mobile connectivity, as it gears up to compete with the likes of Amazon and other tech companies, as well as other OTT players like Hulu and Netflix, and stave off the threat of becoming a “dumb pipe.”
A source inside the company (which owns TechCrunch by way of Oath, the combined business of AOL and Yahoo, but maintains a hands-off policy editorially) confirmed to us that the carrier is planning an ‘over the top’ content offering. It’s also working on a connected home product, a platform for residential customers to help managed things like smart lights, heating and alarm systems.
It is not clear when these products might be launched, nor what kind of pricing they might have. Verizon declined to comment for this article.
There have been earlier reports of Verizon working on a new video service: those reports say it has been delayed in part because of executive changes at the company, and in part because of ongoing negotiations around the content.
From what we understand, the service will see Verizon focus on packaging video content in “channels” that could take the form of standalone apps, which would be distributed beyond the company’s FiOS broadband service.
The channels would be designed around themes like news, sports and entertainment and will bring together content already owned by Oath (which includes TechCruch, but also Engadget, Huffington Post, and many other online properties), with premium content from third party sources. It’s not clear if the service would be a paid offering or ad-supported.
This new video service is distinct from Go90, a free, ad-supported OTT video effort that Verizon has been running since 2015 aimed at millennial audiences that has had mixed success so far.
Each channel of the new service would feature “marquee” content, our source said, which would help drive subscribers and viewers and help differentiate the content from a sea of video competitors. As one example, the sports channel might leverage some of the NFL content that Verizon recently secured for $1.5 billion.
At the CES event, Oath’s CEO Tim Armstrong talked a little about the high cost of content — something that could be offset were the material leveraged in more strategic ways. “It was a lot of money for the NFL…it’s real money,” he admitted in an interview on stage at CES. “That being said, look at the size of the everyday transactions that are happening in the content space. Look at the size of the valuations of the digital companies overall. I would argue a five-year deal for the NFL is money well spent to drive Verizon’s sports strategies.”
In all, Verizon has invested between $4 billion and $5 billion in content deals, our source estimated, and as those are getting renegotiated, it’s working in a digital component in order to include it in this new OTT service. In many cases, we understand, those content deals are being renegotiated with the digital component getting added in at little or no extra cost.
The OTT product would be an interesting plot twist for Verizon, which stands to be a big beneficiary of Net Neutrality getting killed.
Many have decried how large carriers could potentially use the regulatory changes to push preferred content (and their own) ahead of that of would-be competitors. But going ahead with an OTT offering underscores how a lot of consumers are, in fact, opting to use a range of channels when looking for online entertainment these days.
Verizon may be hoping to capitalise in both cases: on-net, it can offer zero-rated content to its existing subscribers; off-net, it can market to the many who are not already subscribing to one of its carrier services, but might still be among the 1 billion who are connected to other services owned by the company, such as Yahoo Mail, or loyal readers of one of its media properties.
“There’s a commoditization potential with a lot of brands based on just being pure platform [play],” said Armstrong in his interview. “I think from a consumer standpoint and from a business standpoint, our strategy is differentiated for two main reasons: it’s all built around mobile, and we also have enough traffic [across our properties] — a billion users — to have platform scale.”
OTT video that can be consumed on mobile devices, or on broadband networks — Verizon’s own or those of others — represents a big opportunity for Verizon, in that it currently does not have a signficant holding in this area as of yet.
Verizon is the largest wireless operator in the US, with around 149 million subscribers. It has a significantly smaller number of users paying it for FiOS video services — just 4.65 million according to its most recent quarterly earnings, with numbers currently on the decline.
Video is not the only product where Verizon hopes it can expand its services business.
TechCrunch also learned that Verizon is also working on a connected home strategy. This would see the carrier offering its subscribers the option of taking an additional service to help manage and monitor connected devices — be they phones or “smart” home gadgets and electrics, tapping into the fact that people are gradually migrating to more of these devices in the home and will want the option of controlling them from a single hub.
This is also an area where other broadband providers are hoping to make a mark: this week, Comcast also announced a connected home platform for its Xfinity subscribers, giving them a free service to connect and manage a range of devices like smart thermostats and security systems.
The company later this year will start to roll out a residential 5G broadband service — essentially an alternative to fixed broadband — and launching a residential IoT business, adding connected devices within your home, would be a logical extension of that.
To date Verizon has made a number of acquisitions in the area of IoT, and while much of this appeared aimed at the company’s enterprise business, it seems that there could be a residential application here, too.
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