'You've Got Verizon'

12 May, 2015 By: Erik Gruenwedel

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Telecom acquiring dotcom pioneer AOL for $4.4 billion

Verizon Communications May 12 announced it is purchasing dotcom pioneer AOL for $4.4 billion, or about $50 per share, pending regulatory approval. The deal, which is similar to Comcast’s acquisition of NBC Universal, amounts to the pipes (Verizon) buying content for the former’s existing FiOS TV and LTE wireless video businesses, and pending over-the-top video service.

AOL CEO Tim Armstrong will remain in his position, telling CNBC he would be “fully vested” in Verizon. The transaction is expected to close this summer.

AOL, which was one of the original dotcoms founded by Steve Case in 1985 and once owned by Time Warner, remains a leader in digital content and advertising. Key assets include a subscription business and portfolio of content brands, including The Huffington Post, TechCrunch, Engadget, MAKERS and AOL.com, as well as Emmy-nominated original video and advertising platforms.

Indeed, Verizon plans to launch a mobile device-centric OTT video service this summer that would include news, media and technology, in addition to entertainment.

While AOL’s premium content attract more than 200 million monthly eyeballs, Verizon’s real interest in AOL is access to the platform technology for video content monetization, as well as its in-house expertise in growing a digital content business in a multi-channel world where mobile is increasingly the dominant screen, according to 451 Research.

The research firm contends the deal affords Verizon opportunities to leverage its recently established “media insights” group to bring a new layer of subscriber context into the AOL platform.

Verizon CEO Lowell McAdam seemed to agree.

“We’ve been strategically investing in emerging technology … that taps into the market shift to digital content and advertising,” McAdam said in a statement.

Finally, the move to acquire AOL underscores Verizon’s increased concern regarding linear TV – underscored by the recent launch of FiOS Custom TV, a skinny pay-TV bundle. With general TV viewership down about 5% this year (16% among younger viewers), and Web content viewing up over 30% (20% for mobile video), Verizon perhaps has no real intention of incorporating traditional media companies into their “disruptive” offering, according to MoffettNathanson.

The research firm said Verizon’s recent content deals with Maker Studios and AwesomenessTV includes 100 million subscribers totaling one billion views a month.

“Perhaps their planned [OTT video] offering really is aimed at ‘what comes next,’” MoffettNathanson wrote in a May 12 blog.

 

 

 

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