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Verizon Feels Cord-Cutting Pinch

While still reporting FiOS revenue and subscriber growth in the fourth quarter, Verizon acknowledged in its earnings report today that the traditional TV business isn't what it used to be. In fact, FiOS video penetration was slightly down year-over-year (35.3% versus 35.8%) as Verizon cited greater interest from customers in broadband-only subscriptions.

Overall, Verizon Communications Inc. (NYSE: VZ) added just 20,000 video subs in Q4 2015, way down from 116,000 subs in Q4 2014. In contrast, the company added 99,000 broadband subscribers, although that number still fell short of the 145,000 Internet subs Verizon gained in the fourth quarter of 2014.

The revenue story was somewhat rosier. Total FiOS revenue reached $3.5 billion, up from $3.3 billion in the year-ago quarter. Verizon attributed the gains to its broadband business and increased adoption of its higher-end Quantum Internet services.

Repeatedly during the company's earnings call, Verizon CFO Fran Shammo talked about waning customer interest in traditional TV. He noted that Verizon is "continuing to see a decline in linear video demand" and "we are starting to see more and more customers coming into FiOS on a broadband-only basis."

To combat video declines, Shammo said Verizon will continue to offer consumers more choices both through FiOS and the company's new Go90 mobile video platform. On the FiOS front, Shammo said Verizon will "refresh" its Custom TV bundles, which have proven popular with customers. Skinnier than the normal cable television package, Verizon's Custom TV offerings are typically $20 cheaper than an average FiOS TV product. Consumers are responding favorably to the option. Shammo noted that Custom TV services now make up about one third of FiOS overall video sales. (See Skinny Bundles Sock FiOS Video Revenues.)

Want to know more about the impact of Web services on the pay-TV sector? Check out our dedicated OTT services content channel here on Light Reading.

With regard to Go90, Verizon hasn't yet provided any details on adoption, but Shammo did say that "internally we've surpassed what we thought we would have at this time." He also suggested that consumers aren't just downloading the app, but that some are also starting to return to Go90 multiple times during the day. Shammo cautioned that Go90 is not expected to be profitable over the next one to two years, but said that it will help build top line company growth. (See Verizon's Go90 Is Live – Will Anyone Watch? and FiOS TV Director Cuts the Cord.)

Shammo also highlighted Verizon's acquisition of AOL, which closed last June, as a positive indicator for the company's video business. He referenced a $300 million increase in revenue from AOL between the third and fourth quarters of 2015, saying that the gains are a sign of advertising strength. Shammo added that he expects to have more to share on both Go90 and AOL by mid-year. (See Verizon's $4.4B AOL Buy a Digital Media Play.)

The other major wireline story to come out of Verizon's earnings report was the continued struggle of the company's enterprise business. The company reported further declines in the fourth quarter even as there is speculation about whether Verizon wants to remain in the enterprise sector. (See Verizon Seeks $2.5B From Data Center Sale – Report.)

Addressing that speculation, Shammo said that Verizon continues to examine whether the company's data center business is more valuable "inside or outside the portfolio." He declared that no decisions have been made, but that the company is still exploring its options.

Verizon's Global Enterprise business saw revenues of $3.25 billion last quarter, down from $3.36 billion a year ago.

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

wanlord 2/5/2016 | 12:00:10 PM
Go90 Superbowl They are advertising that they will stream the Superbowl in Go90 this weekend. I re-downloaded again just to see if it will actually work and not crumble under network and system load. Of course the app crashes when just browsing. Probably not the best marketing stunt when the app is not stable. It's going to piss a lot of folks off and make the reviews worse.
steve q 1/24/2016 | 9:41:28 PM
Re: Go90 Why will anyone like to choose G90 in the first place. With the cost of the data plan's that is needed. And with the FiOS mobile app it gives you more then what G90 can provide it customer it true not everyone has FiOS but with the number of cord cutter Verizon must move to them to stay ahead of the Comcast and Google. If Verizon see that the G90 is not making no head way, it be too late to restarted pushing out the FiOS data service to those town that are looking to move outside the box of the cable company. Google will have plan's in place to push Verizon out of the high income town and will have to hope for the best on 5g.
Joe Stanganelli 1/22/2016 | 10:02:43 PM
Re: Go90 Really what it comes down to is the unbundling debate.  Cable is a worthwhile expense because of a handful of shows on a handful of channels -- shows that are available online only scarcely if at all (even if one is okay looking at pirated copies).

Pllus, I imagine for some it's kind of nice to go with a single vendor as opposed to multiple vendors (e.g., going with a cable provider as opposed to subscribing to Netflix, Hulu, Amazon Prime, HBO Go, etc.).
Joe Stanganelli 1/22/2016 | 9:58:56 PM
Internet video vs. Bad economy To be fair, I wonder how much of this goes to competition from online video and how much of this is attributable to an only barely recovering economy (that has begun to tumble recently yet again).

Granted, online available of valued video content makes the decision to cut the cord a lot easier for the cost-conscious consumer, but I suspect many would have cut the cord even without this resource.
Mitch Wagner 1/22/2016 | 10:30:27 AM
Re: Go90 Go90 doesn't prevent you from using YouTube. But why look at Go90 at all when there are so many other video options available?
Liz Greenberg 1/21/2016 | 8:31:24 PM
Re: Go90 I think the real question is why not choose anything and everything over Verizon and probably its Go90?  There are so many choices outside of have 300 or more useless channels (or even say 80 useless ones) that why choose any traditional cable or telecom company for this? 
brooks7 1/21/2016 | 7:29:22 PM
Re: Go90 Why would having Go90 prevent you from using Youtube?


Mitch Wagner 1/21/2016 | 5:33:39 PM
Re: Go90 OK, then that leads to the next question -- why choose Go90 over YouTube?
msilbey 1/21/2016 | 5:06:10 PM
Re: Go90 It's free. Think more YouTube than Netflix.
Mitch Wagner 1/21/2016 | 4:40:54 PM
Go90 What's the value to Go90? Why would consumers choose it rather than Netflix, Hulu, YouTube, Amazon Prime, etc?
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