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.)
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