Video services

Verizon on Video: It's All About the Kids

Kids these days. That's what Verizon's after with its video strategy -- not just millennials, but even younger cohorts ranging down into the pre-teen years.

In a so-so earnings report today, Verizon CFO Fran Shammo was heavy on the optimism for his company's approach to video services. That approach includes a focus on building a content portfolio targeted at viewers under 25, and on a mobile-first strategy that Verizon Communications Inc. (NYSE: VZ) is piloting with its Go90 video app.

Shammo declined to give any details on Go90 viewership, saying only that Verizon is "encouraged" by early response. But he did talk about the particular value of some of the content in the Go90 bundle. He cited AwesomenessTV, in which Verizon now has a 25% ownership stake, as the number-one digital brand among females between the ages of 12 and 24. And he referenced Complex Media, which Verizon just acquired in partnership with Hearst, as another number-one digital brand, this time among males aged 18 to 24.

For all the focus on content, however, Shammo managed to gloss over a regulatory issue that could seriously impact Verizon's ability to monetize video. Financial analyst Craig Moffett of MoffettNathanson Research asked whether an FCC Notice of Proposed Rulemaking (NPRM) covering viewer privacy rights and the use of customer data might limit Verizon's monetization options. Specifically, Moffett asked about Verizon's ability to make money off of its AOL acquisition, and a possible future acquisition of Yahoo Inc. (Nasdaq: YHOO), given potential FCC action. (See Verizon, Softbank Likely Yahoo Contenders.)

Shammo's response was to say that Verizon always has privacy and security top of mind, and that if any new rule is implemented, it should apply to everyone -- not just broadband providers, but also companies like Facebook and Google (Nasdaq: GOOG).

So far, Verizon is doing quite well with the AOL property: According to the giant US operator, the revenues generated by AOL in the first three months of 2016 marked the best first-quarter numbers for the digital brand in five years. Verizon's 8K filing reveals that Q1 revenues from AOL totaled $669 million.

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On the wireline front, Verizon's FiOS service continues to gain little attention, but the company nonetheless added 98,000 FiOS Internet and 36,000 FiOS video connections in the quarter. FiOS revenue also jumped 5% compared to the year-ago-quarter to $3.5 billion.

Several factors will impact those numbers going forward. To start, Verizon completed the sale of three FiOS markets to Frontier on April 1. (See Frontier Takes Over FiOS Tomorrow.)

In a surprise announcement less than two weeks later, the company then said it plans to expand its FiOS footprint in Boston as part of a larger deal with the city. (See Verizon Throws Surprise FiOS Party for Boston.)

That news shouldn't encourage consumers hoping for new FiOS deployments in other regions, however. Shammo stated quite clearly that "Boston is a unique situation." And he explained how the investment necessary for FiOS in Boston is only an incremental amount higher than the investment Verizon already planned to make in the city as part of its fiber densification effort aimed at supporting more 4G and new 5G wireless services.

It's possible Verizon could follow a similar strategy to the Boston plan in select cities in Virginia and Maryland where Verizon already has FiOS nearby, but Shammo wasn't overly enthusiastic about the idea.

"We still don't have Alexandria built out, or Baltimore," noted Shammo, "so if we get to a position where we believe we're going to need to invest in densification in those cities, then that's an opportunity for us to take a look at it. But at this time we're concentrating on Boston."

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

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