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Verizon Embracing Generational Shift in Linear TV

18 Sep, 2015 By: Erik Gruenwedel

Verizon CEO Lowell McAdam

As media companies grapple with shrinking pay-TV subscriber bases, Verizon is turning its back on the status quo to embrace skinnier TV channel bundles and over-the-top video, CEO Lowell McAdam told an investor group.

Speaking Sept. 17 at Goldman Sachs Communacopia confab in New York, McAdam said the market is reacting to the reality that the traditional 100-plus channel bundle is not a priority among the younger millennial demographic, whose household size is approaching 20 million.

Verizon has been rolling out “FiOS Custom TV” packages for $54.99 a month featuring a 35-channel program slate. Additional sports and entertainment packages — the former featuring ESPN — can be acquired for $10 a month.

A similar package featuring broadband connectivity and telephone service is available for $79.99. Disney-owned ESPN has filed litigation against Verizon claiming it doesn’t have the right to subcontract the No. 1 sports channel to smaller channel bundles.

“We will continue to support the linear TV as those customers want it, but it’s very clear to us the market is moving more towards broadband, skinnier bundles and over-the-top,” McAdam said, adding that 30% to 40% of new video subs are opting for fewer channel offerings. 

“That shows you customers want that kind of service. It allows for a little bit better profitability for us, but it allows the customer to right-size their budget,” he said.

Indeed, Verizon ended the most-recent fiscal period with 5.7 million FiOS TV subs and 6.8 million FiOS broadband subs. The TV subs put Verizon among the top five pay-TV operators, which McAdams likens to a glass half-empty scenario.

“You can view it as a good thing or not so good thing. And our view is that if you don’t disrupt yourself [with OTT video], somebody else is going to come in and disrupt you,” he said. “I do believe that FiOS profitability will continue, but I also believe the trend to more broadband and less linear TV is probably likely.”

To separate itself in the burgeoning OTT space, later this month Verizon will officially launch Go90, a streaming service targeting a youth demo predicated upon mobile device usage.

In addition to sports, Go90 will offer DreamWorks Animation’s AwesomenessTV, recently acquired AOL, Vice Media, Scripps Media, Huffington Post, and Tech Crunch, among others.

Taking advantage of the demo’s obsession with social media, Go90 users will be able share programming choices, video clips, game stats, etc., with authorized friends.

“So it’s not only the type of content, it’s how you interact with the content that I think is going to be a hit with this generation,” McAdam said. “The real driver here is millennial content, that frankly, a lot of us in the room [here] aren’t familiar with.”

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