Verizon finally announced its long-rumored acquisition of the Intel Media assets this week. As I predicted back in November, this was a win-win deal for both parties. Intel was able to save face and walk away from the OTT table, while Verizon doubled down on video and walked away with some very interesting assets. So now that the deal is announced, what does it mean for the future of TV?
Two themes come to mind.
1. Pay-TV is no Longer a Facilities-based Game
Necessity is the mother of invention. In Verizon’s case, its lack of a nationwide facilities-based TV solution may just lead the TV industry into a whole new era. It has certainly tried everything else. FiOS is a perfectly great service, but wildly expensive to build out and not terribly differentiated from other pay-TV services. Next, Verizon’s 17-month joint venture with Comcast went nowhere. Then again, it may have planted the seed in minds of Verizon execs for an OTT video service. Finally, there is the aggressive push by Verizon Digital Media Services to compete with Akamai and other CDN providers, most recently via back-to-back acquisitions of upLynk and Edgecast. This indicates that Verizon is serious about building out a first-rate IP video infrastructure.
When you add it all up, the logic is clear. Verizon believes that IP video over fixed and mobile broadband is going to be huge—as does pretty much everyone else. Verizon has concluded, however, that neither partnering with legacy pay-TV guys (e.g., Comcast) nor building it out its own facilities-based service (e.g., FiOS) is the best way to win that market. It already owns a large part of the mobile market, so what’s left? OTT, of course. Or, as we at TDG like to call it, quantum video. Pay-TV services that work over your broadband at home (whether from Verizon or anyone else), WiFi when at school and Starbucks, and Verizon’s mobile 4G mobile network when on the go. Any device. Any conduit. Any content. Any context.
And it’s about time.
2. Get Ready for OTT TV Bundles Everywhere
As I wrote earlier this week, Netflix is the company rewriting the playbook for the TV industry right now. One of the more interesting stories to watch in 2014 will be Netflix’s efforts to bundle its content with broadband providers. I predict Netflix will find at least one provider who takes up this proposition in 2014.
Verizon, in turn, is now clearly headed down a path of having its own OTT offering that it can bundle with its bread-and-butter mobile data plans. Remember, Verizon Wireless enjoys a previous positive experience with this model just a few years back with its V CAST video service. V CAST was bundled with 3G phones for several years in the pre-iOS and Android era. Although it may seem hard to believe now, V CAST helped move a huge number of early-generation smart phones and data plans in its time, transforming Verizon’s mobile business from voice-and-text to mobile broadband in just a couple of years. If Verizon could find a way to market and sell mobile video at retail in 2004 (the year V CAST launched), it can bundle and sell a Netflix competitor at retail in 2014. Once it does, we may see a wave of new services and partnerships as device makers, incumbent TV operators, mobile carriers, and other OTT brands like Hulu race to catch up.
Move over Netflix. Verizon’s acquisition of Intel Media, combined with the other video assets it has acquired in the past 12 months, is proof positive that the folks from Basking Ridge are dead serious about bundling OTT video with broadband.
The battle has been joined. Expect others to follow.