Cementing its decision to avoid the financial and operational entanglements of creating its own OTT-TV service, Verizon on Tuesday announced it has forged a deal to integrate and offer subscription video services from YouTube TV to its mobile, 5G Home and Fios Internet customers.

Verizon and YouTube TV did not announce the financial terms of the arrangement, including any special pricing or packaging. But they promised "unique, high-value" promotions for YouTube TV, which currently starts at $49.99 per month, features a cloud DVR and allows for six simultaneous streams per subscription. Verizon did not announce how much of a cut it might receive from YouTube TV-related revenues that come way of the partnership.

In addition to enabling Verizon's mobile customers to access YouTube TV on the go, the pact also gives Verizon Fios Internet customers another pay-TV option, Hans Vestberg, Verizon's CEO, said today on the company's Q1 earnings call.

The partnership with YouTube TV ties into Verizon's strategy to focus on the network and connectivity and to avoid the potentially massive investments required to build and deploy its own OTT-TV service. The pact also follows recent decisions by Verizon to shut down Go90, a free, ad-supported streaming service powered partly by its acquisition of the OnCue assets from Intel Corp., and the demise of the Oath brand, which had contained the AOL and Yahoo assets (those assets are now tucked into the Verizon Media Group unit).

"It [the YouTube TV pact] comes back to our main strategy that we are focusing on doing the network, we're doing the platform, and we're doing the integration, but we're not making... the investments [for] the TV platform nor the content," Vestberg said. "We see that as our role in this ecosystem."

That Verizon and YouTube TV are hooking up isn't a huge surprise. The two signaled a potential future partnership last fall when Verizon agreed to bundle in an Apple TV or Google Chromecast and three months of YouTube TV to customers who signed up for its new 5G Home fixed wireless broadband service.

This new deal solidifies that partnership, and also gives Verizon an OTT-TV option to provide to customers in and out of the home. In additon, the YouTube TV agreement gives Verizon a counter to AT&T, which has its own OTT-TV service (DirecTV Now), as well as T-Mobile, which recently unveiled a new home-based pay-TV service, called TVision Home, that will complement the carrier's national mobile TV offering slated to launch later this year.

Fios TV still shedding subs
Verizon is also snuggling up to YouTube TV as its own Fios-branded pay-TV service continues to struggle. Verizon shed about 53,000 Fios TV subs in Q1, worse than the 40,000 losses expected by analysts, and widened significantly from the 22,000 video losses in the year-ago quarter. Despite those losses, Verizon ended Q1 with a still-sizable pay-TV base of 4.39 million subs.

Fios TV will live on. But the Verizon-YouTube TV agreement does represent another page in a developing story that is seeing service providers de-emphasize their own pay-TV offerings to instead focus more heavily on higher-margin broadband services.

For YouTube TV, which Google launched two years ago, the Verizon hook-up will give the service more direct exposure to consumers and a competitive edge against other virtual MVPDs, such as DirecTV Now, Sling TV, Philo, PlayStation Vue, fuboTV and Vidgo.

The partnership is a "fascinating tie-up for both companies and one that could be a blockbuster," Paolo Pescatore, tech, media and telco analyst at PP Foresight, said in emailed comments to Light Reading. "Verizon is in the process of rebuilding its content strategy and needs services to sell 5G connections. While YouTube is seeking to gain new audiences with telco relationships; an approach that has been hugely successful for Netflix and Amazon."

For Verizon, the partnership is "far better than trying to build an OTT-TV video business organically," he added, noting that YouTube TV is likewise poised to drive a lot of data traffic on Verizon's network.

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— Jeff Baumgartner, Senior Editor, Light Reading