TV Everywhere Stinks, and Verizon Wants to Fix It
Verizon CEO Lowell McAdams told investors on Tuesday that the company is in talks with content providers to deliver web-based TV programming to mobile devices. This comes just one day after Walt Disney agreed to allow Dish Network to sell its live Internet streaming services as part of an Internet-based IPTV bundle.
Internet-delivered television is still out of reach for many of the larger pay-TV providers, but Verizon could certainly benefit the most from securing rights to stream live TV anywhere.
Fits with recent acquisitions
Verizon made two big acquisitions recently: EdgeCast and OnCue.
EdgeCast is a CDN provider that moves data closer to the end user to provide for faster delivery. In essence, it makes sure there's no lag in your video stream. Verizon had previously used third-party and in-house CDNs to deliver content across the country, but bringing EdgeCast in-house will certainly cut down costs as it delivers more data.
OnCue is a pay-TV project started by Intel. It's unique in that it was essentially built for Internet-delivered TV from the ground up. After struggling to acquire the necessary content rights, Intel sold it to Verizon.
Both acquisitions naturally feed into delivering television over the Internet -- true IPTV. If Verizon can secure the rights to deliver programming over the Internet via mobile devices, it could also mean the company can take full advantage of these recent acquisitions through in-home IPTV service.
As a result, Verizon would be able to expand its FiOS or OnCue service nationwide, reaching a much larger audience. Currently, Verizon only offers FiOS to about 15 million households.
Competitive advantage in mobile
The real breadwinner for Verizon, of course, is wireless. Verizon Wireless accounts for about two-thirds of Verizon's total revenue.
The wireless market is becoming much more competitive. T-Mobile has seen success with its UnCarrier initiative, successfully attracting new subscribers. While most are defecting from Sprint and AT&T, Verizon is not immune to T-Mobile's advances.
Providing web-based television delivery through its wireless network will allow Verizon to attract more high-value subscribers and extract more value from its current subscribers.
IPTV is coming
Many cable operators have been pushing for IPTV for sometime. IP delivered television has the advantage of a switch mechanism that allows cable operators to send just the data the subscriber is requesting. This reduces the need to expand bandwidth as data streams increase in size with HD and SuperHD content.
Dish Network's deal with Disney may allow it to sell television service to users without having to mount a satellite dish on their roofs. This opens up a larger market for the company, including apartment dwellers, and saves on installation costs that the company usually eats in order to sign up new subscribers.
Disney, for its part, was able to use the content rights to get what it wanted from Dish -- removal of the AutoHop feature from the Hopper (for ABC) and an agreeable carriage fee for its bundle of channels. Because content owners hold the upper hand here -- delivery through cable or over the Internet doesn't matter that much to them -- they may hold out for added benefits or a higher price.
For example, OnCue automatically stores everything that aired over the past three days on a cloud server in case a subscriber wants to watch it later. As part of a deal with content owners to receive IPTV rights, Verizon may have to disable fast-forwarding through commercials for three days -- the period advertisers still pay per commercial view.
Not to be outdone
The deal between Dish and Disney sets a precedent for other content providers to offer Internet-delivered television. Verizon wants to take it a step further and offer television programming everywhere. There will be some high costs associated with such a service, but Verizon is in a strong position to leverage those rights with its recent acquisitions and widespread wireless network.
You know cable's going away. But do you know how to profit? Companies like Verizon are posturing for the lead in this $2.2 trillion race. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.
The article TV Everywhere Stinks, and Verizon Wants to Fix It originally appeared on Fool.com.
Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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