Sep 12, 2015

Verizon’s Go90 Makes All The Right Moves

Originally published at TDG Research on September 10, 2015

This week Verizon announced the launch of its new Go90 service to a small group of existing customers. Go90 is Verizon’s own version of a standalone TV service though, as we shall see, it is a unique offering that has little in common with conventional pay-TV services.

At the same time, Verizon also announced that it would begin rolling out a new 5G mobile service in 2016. 5G promises to be a marked improvement over 4G, with much higher bandwidth and greater stability.

So what’s going on here? Is Verizon, a mobile powerhouse, going to be the company that brings us the future of television?
Well, sort of. Verizon appears poised to bring us a future of television, but not the future of television. Go90 is a well-crafted ‘snacking’ system that allows mobile viewers to partake in both short- and long-form content, which more or less reflects the way people watch video today.

An Ad-Supported Network That’s Free
While many scoffed at Verizon’s AOL purchase, the service has proved to be a boon for Verizon as it launches Go90. AOL’s short-form properties like AwesomenessTV provide ‘snackable’ content that viewers can watch on the go, while the mobile ad monetization platforms Verizon inherited in the deal have helped them to create a monetizable ecosystem.

By combining short-form video from YouTube creators with clips and programs from TV networks like Comedy Central and Discovery, Verizon has pulled together a content bouquet that should prove quite attractive to viewers, particularly at the current price point (that is, zero). That’s right: the service, which is ad-supported, is currently offered for free.

Why would Verizon do that? The easy answer is bandwidth. Remember, Verizon is first and foremost a mobile network operator. The more people watch bandwidth-heavy video, the more likely they are to increase their monthly data plans, and the more likely they are to incur monthly overages. Since Go90 is being presented as a complement to the viewer’s existing pay-TV service (not a replacement), the extra five or ten dollars per month a user may pay to increase their data plan might not seem like a big deal given the convenience and the amount of available content. But multiply that five or ten dollars over tens of millions of users, and you’ll see why Verizon is so excited about Go90.

But Go90 is just Step One in Verizon’s version of the future of television. Step Two will likely come next year, when 5G starts to roll out. That’s when Verizon will be able to start converting all those Go90 customers to full-on pay-TV customers, because 5G should be able to provide the bandwidth necessary to power a home television experience. Since Verizon already has rights to everything from HBO to the NFL, recruiting customers for a full mobile-based pay-TV service may not prove all that difficult. Especially if that service were free to Verizon Wireless customers who’d already signed up for higher monthly bandwidth allotments.

That’s not as absurd as it may sound. Keep in mind that pay-TV is already a loss leader for cable companies who today make their real money selling broadband service. So why shouldn’t Verizon follow suit and use its mobile pay-TV service to build up its wireless customer base? In addition to drawing in new users, the service will help create stickiness, as users will be less prone to leave if they know they have to give up Go90 in the process.

A single business model will not define the future of television. Rather, it will be built from a combination of models, with different incarnations expressed relative to the type of company that provides the TV service. Verizon, whose mobile business is many times the size of its FIOS broadband business, is building its own version of a television bundle to increase its value for its mobile customers at a time of increased competition. With 5G looming on the horizon, look for others to try and copy the Go90 model, making mobile an important piece of the television equation.

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