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Verizon Sports Big Plans for Yahoo

Alan Breznick
7/26/2016
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Watch out, Google and Facebook. Fresh off its $4.83 billion purchase of Yahoo's operating business, Verizon has ambitious plans to challenge your domination of the digital media market.

Verizon Communications Inc. (NYSE: VZ) Chairman & CEO Lowell McAdam made that intent clear this morning. Speaking on his company's second-quarter earnings call, McAdam said Verizon aims to leverage Yahoo Inc. (Nasdaq: YHOO)'s major online media assets to attract more viewers and advertising and drive both revenue and profits for the big US telecom operator, putting it on the same level as Google (Nasdaq: GOOG) and Facebook .

"We see tremendous opportunities in the digital media marketplace," McAdam told investors and reporters on the call. "Verizon intends to be a significant player in this space."

For one thing, McAdam said, Verizon plans to leverage the Yahoo Sports unit to build stronger partnerships with the major sports leagues, starting with the NFL and NBA. After having talked to both leagues, he likes the idea of streaming more pro football and basketball content across all four of Verizon's digital media platforms – Fios, AOL, Go90 and now Yahoo.

"We can work with them on strengthening their game," he said. "We view this as a waterfall of content."

Secondly, McAdam sees a big opportunity to leverage the Yahoo Finance property to stream more content to its wireline, wireless and online subscribers. He also sees great promise in combining the email platforms of Yahoo, AOL, Go90 and Verizon to drive more traffic to its properties.

With Yahoo now in its pocket, Verizon CFO Fran Shammo said the telecom operator will focus first on boosting media revenues through increased viewership and higher ad receipts, and then on raising profits. "We're looking at this as a portfolio of assets," he said. Besides its content brands, Yahoo also owns ad technology assets, including: a programmatic demand-side platform gained through its acquisition of Brightroll; mobile app analytics service Flurry; and native and search advertising solution Gemini. (See Yahoo Signing Off in $4.83B Sale to Verizon.)


Want to know more about OTT video trends? Check out our dedicated OTT video content channel here on Light Reading.


Verizon's big challenge now will be how to integrate all these assets, including AOL's New York City-based operations and Yahoo's Silicon Valley offices, into an entity that can compete at web-scale in a way that both AOL and Yahoo couldn't do on their own. McAdam acknowledged this challenge on the earnings call, noting that "we don't kid ourselves about execution."

Neither McAdam nor Shammo commented on the role that Yahoo CEO Marissa Mayer will play once the acquisition closes, which is expected to happen early next year. But AOL CEO Tim Armstrong, who will direct the integration process, has said Mayer will assist in the transition and could stay on longer with Verizon.

Verizon officials expounded on the video and other opportunities of the Yahoo deal after the company suffered through a ragged quarter heavily impacted by the bitter 45-day workers strike in the spring. With relatively few employees available to process new orders and install equipment in customers' homes, Verizon's wireline unit shed 41,000 Fios Video and 13,000 Internet subscribers in the second quarter, turning in one of Fios' worst performances to date. Total quarterly Fios revenue, however, still managed to rise 3.7% to $2.8 billion, compared to the year-ago period.

Verizon said it made significant progress in working through a backlog of Fios installations in June and has since returned to its normal run rate of Fios connection growth. In general, Shammo said, "we'll get back to normal growth in the third quarter." But he advised investors that while the current quarter will see positive growth, "it will probably be less than a normal third quarter."

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
7/28/2016 | 2:37:19 PM
Re: What next for Marissa Mayer?
Mayer works for the shareholders. If they decide she gave them good return on their investment -- or minimized loss, if that's a better descriptor -- then her tenure is successful. 

I'm reminded of the way Eric Schmidt took over as CEO of struggling Novell, sold it to private investors, and went on to Google. 
brooks7
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brooks7,
User Rank: Light Sabre
7/27/2016 | 8:27:33 PM
Re: I get it
Nobody is denying that there are lots of really bad startups.

What is happening is like a frothing foam.  By the time a telco has made a committee to study something new, 5 firms South of Market in San Francisco have it up and running.  3 of those will fail miserably and 1 will greatly struggle, but that 5th one will have captured the bulk of the market before the Telco even starts working on it.

3 years later a Telco makes a team to start prototyping the competitive product and are shocked when nobody buys it.

The methods and time frames are so different that they are not in the same zip code.

And finally Dennis, I agree with you and so does Verizon.  They ARE trying to shut down their legacy business.  Have been doing so slowly for years.  They are fighting regulators and unions to do so.  It may take another 5 - 10 years but they will be out of it as soon as they can.

seven

 
Joe Stanganelli
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Joe Stanganelli,
User Rank: Light Sabre
7/27/2016 | 5:47:34 PM
Re: I get it
You misunderstand me.  I did not call all Millennials dumb.  I called the Millennials who take jobs at strategy-less startups for low pay and long hours dumb.

I'm far from the only person to make such an observation.  (See, e.g., HubSpot criticism.)
Joe Stanganelli
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Joe Stanganelli,
User Rank: Light Sabre
7/27/2016 | 5:45:34 PM
Re: What next for Marissa Mayer?
@Mitch: Just because others are bigger failures than Marissa Mayer doesn't really make her any less of a failure.  Not that being at the helm of Yahoo in her tenure is/would have been an easy task by any means, but she kept up the acqui-hire and acqui-destroy strategies of her predecessors -- and she did it with a lot of high-falutin' talk about mobile but with no actually executable strategy that rose to the surface in any appreciable or tangible way.

Marissa Mayer is very good at one thing, though: Marketing Marissa Mayer.  Little wonder she's holding on to her job.
KBode
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50%
KBode,
User Rank: Light Sabre
7/27/2016 | 3:31:45 PM
Re: I get it
"Those "dumb" millenials are the ones running companies in Silicon Valley and you can't argue that many of them are disrupting the telcos. They move faster, don't get bogged down with politics, and strive to hire the best and brightest from all over the world. Telco companies don't pay nearly as well, consider their employees an expense, continue to practice bell curve performance policies forcing employees into a standard percentile instead of recongizing that is not natural."

 

Absolutely. you dont' pivot from a generation of turf protection and lobbying to protect legacy interests -- to becoming a disruptive and innovative force in new media -- magically. I think this is going to be (and has been, if you look at SugarString) a pretty painful learning process for Verizon.

Telco culture breeds yes men and women. I've seen it for years. Silicon Valley has other problems, but that level of myopia is not one of them. These companies are not good at innovation.
wanlord
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wanlord,
User Rank: Light Sabre
7/27/2016 | 2:28:40 PM
Re: I get it
@Joe S. I was using those as visable examples, but it's more than those things. It's the culture in general. Pay, Stock, etc. Those "dumb" millenials are the ones running companies in Silicon Valley and you can't argue that many of them are disrupting the telcos. They move faster, don't get bogged down with politics, and strive to hire the best and brightest from all over the world. Telco companies don't pay nearly as well, consider their employees an expense, continue to practice bell curve performance policies forcing employees into a standard percentile instead of recongizing that is not natural. They don't practice 360 degree feedback leaving decisions up to management which leads to bias. Overall Top Down management culture with the "Ape in the Corner" office has to go away for them to compete. When employees dread coming into the office and wonder whats going to be taken away next (whether it's the free coffee, or arguing for with an admin on the need for more dry erase markers for an brain storming session), it just demotivates them overtime. 
mendyk
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50%
mendyk,
User Rank: Light Sabre
7/27/2016 | 1:09:50 PM
Re: I get it
If you are in a business that you don't believe in or respect, then leave it and do something else. That holds for everyone in an organization, bottom to top.
brooks7
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50%
brooks7,
User Rank: Light Sabre
7/27/2016 | 12:59:10 PM
Re: I get it
Its a simple answer....he maximizes the value is selling it or shutting it down.  Given the regulations, it is impossible to shut down.  Therefore, you try to sell it.  Given the scale of the business, you have to have willing buyers.

Think about IBM.  Over the years they have shuttered many older businesses (Typewriters, Mainframes are examples).  General Electric is the same way.  If a business is bad, you get out of it.

So let's recap the problem with the legacy business at Verizon:

- it has negative growth that is market based

- it has significant employee challenges and lots of union employees

- it is low margin

- it is highly regulated

- it the mandated to be wholesaled out to its competitors

If you were starting a business in our space, few would actively choose to be in the space.  

seven

 

 
mendyk
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0%
mendyk,
User Rank: Light Sabre
7/27/2016 | 11:35:31 AM
Re: I get it
I still come back to this very simple question -- What is the value of a CEO who thinks a significant part of the business he's responsible for is more trouble than it's worth?
steve q
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steve q,
User Rank: Light Sabre
7/26/2016 | 10:01:06 PM
Re: I get it
What reason is Verizon chasing after Facebook when the key company to look at is google and Comcast they are pushing for better service to their customer and by that they are gaining over Verizon. With the move into Boston Ma Verizon should only look at the plus of having more people that can have both FiOS and Verizon wireless at the same time then what any other large company can provide. If I was yahoo/AOL I move the part of the company that Verizon does not own looking at gaining the ground of the 5g license.
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