It is not often that we comment or predict on an industry on the basis of a simple marketing flyer. Never say “never”!
A few weeks ago, I received a curious marketing mailing, child of the unlikely alliance of two corporate giants better known for their fierce rivalry than their mutual good will and benevolence: Comcast (Xfinity) and Verizon (Wireless). The mailing is listed below.
In this offer, the marketing and sales teams of the two corporate giants decide to bury the hatchet and offer a $120 rebate to a Comcast customer who signs-up to a Verizon Wireless two-year contract. It was hardly a coincidence that the rebate was announced just a few weeks before the new iPhone 5 was to be released to the market.
With 22 million Comcast video subscribers and 108 million Verizon Wireless users, it is easy to imagine that the overlap of the two user bases is fairly extensive. In fact, assuming that Verizon’s 37% share of the 290 million US wireless user base is extensible to Comcast’s video subscriber universe, that means about eight million Comcast video subs are also Verizon wireless subscribers. To provide some perspective, eight million paying subs is:
- Equal to two-thirds of all TimeWarner Cable’s subscribers.
- Twice the number of Cox Communications cable subs.
- 2.5 times the number of Cablevision’s subs.
- One fourth the number of Netflix’s subs.
- Twice the size of Verizon FiOS television subscriber count.
- Equal to AT&T telco + Verizon IPTV counts.
- One fourth of all US satellite TV subscribers.
Such numbers speak louder than simple corporate greed. I contend that this “partnership” is but a natural repositioning of the battle lines between the two companies (if they can be called “battle lines”).
- The marketing teams at Comcast and Verizon Wireless have realized something essential to the structure of the US television and wireless industries: crossing over turned out to be more difficult than expected, so “if you can’t beat them, join them.”
- Verizon remains coherent in its decision to stop investing further in its own TV venture, as its CEO Lowell McAdam announced last December at the UBS Conference.
- Cable is trying to pump up the value of the wireless spectrum it sold last December to Verizon Wireless for $3.6 billion, and co-marketing was at the core of the deal’s terms.
- The two companies had already incorporated a marketing cooperation clause in this spectrum sale, hinting that one day the Comcast Xfinity mobile services would be showcased on a Verizon Wireless device.
Hence, I wonder if this pricing and marketing alliance might lead to a deeper collaboration in which the Comcast and Verizon Wireless teams work more closely and share marketing knowledge gained from the results of this offer.
In an age when television MVPDs are trying to reinvent themselves—when “second screen experiences” on tablets and mobile are moving beyond novelty and spurring timid experimentation from broadcasters and advertisers alike—this marketing move by Comcast and Verizon Wireless may pay dividends far beyond reselling wireless service.
In my view, these eight million cohabitants are at the “eye of the interactive television hurricane” that includes second-screen experiences, connected televisions, and social TV; and constitute the battleground where new TV experiences will be tested and defined. In fact, I strongly believe this marketing deal holds the seeds of a major tectonic shift in how the battle for the television will be fought. Consider the following:
- If the experiment is successful, and 15% of the target audience responds positively to this marketing mailing and ditches AT&T for its notoriously poor service quality at the time of a new iPhone launch, Verizon Wireless could add more than one million users. Consumer reaction to the marketing bundles will certainly drive the outcome.
- It could signal a re-alignment of how Cable sees Telco. If this experiment is successful, expect more innovation and cooperation across the “Berlin wall” of traditional Cable and Telco battle lines.
- And, of course, if this marketing cooperation is successful, AT&T will not only lose customers; it may also see its position in the new world of synchronized TV and second-screen experiences eroded.
Maybe we are indeed seeing the first signs of the end of the Cold War between the two camps. In a strange twist of fate, Apple and its new iPhone may end up as the unwilling catalyst of these new market developments, bringing yesterday’s archrivals together in unholy alliances never thought possible.
Time will tell.