Verizon Reorganizes Internally; Focus on 5G, Not OTT Video Content

With more than 150 million subscribers, Verizon is the largest wireless telecommunications operator in the United States. It also does not have a proprietary over-the-top video platform – despite spending more than $1 billion on the short-lived Go90 app, which included some original content.

New CEO Hans Vestberg Nov. 5 announced an internal management restructure that focuses on the consumer, business and media (including Oath) – apparently in that order.

“We’re building on our network transformation efforts … to deliver new customer experiences and optimize the growth opportunities we see as leaders in the 5G era,” Vestberg said in a statement. “We’re focused on how our technology can benefit customers’ lives and society at large.”

Verizon says its media group “sits at the intersection of media, advertising and technology,” with the goal of helping people access and receive media, entertainment, gaming, news, commerce and other services.

It will continue to be led by Guru Gowrappan, who was previously announced as Oath CEO. Former boss Tim Armstrong departed the subsidiary – which includes Yahoo, AOL, HuffPost, BrightRoll, and EdgeCast, among others – earlier this year, reportedly over disagreements with Vestberg regarding his decision to focus on technology rather than video content.

Indeed, last month Verizon launched 5G network coverage in four cities: Los Angeles, Houston, Indianapolis and Sacramento, Calif. Rollout included the choice of a free Apple TV with 4K functionality or Google Chromecast device, and 90-days of access to online TV platform YouTube TV.

“The world’s first commercial 5G service is here,” Ronan Dunne, president of Verizon Wireless, said on Oct. 1. Dunne will now also oversee the consumer segment, focusing on wireless and wireline business segments, including wireless wholesale.

The focus on technology over content echoed former CEO Lowell McAdam’s comments on a fiscal call earlier this year.

“We are not going to be owning content,” McAdam said on the Q2 call. “We’re not going to compete with content. We’re going to be the best partner for the content distribution business.”

Those statements were followed up in May when McAdam told Yahoo Finance Verizon was scuttling plans to launch an OTT video service.

“Our view is that we should partner with those that are in the linear game,” McAdam said. “Let them be very good at what they do. We’ll add digital content into that mix, and we’ll position ourselves for where we become more of an over-the-top video culture versus the linear model that we have today.”

Oath CEO Tim Armstrong Reportedly Departing Verizon, Among Other Executive Exits

Verizon’s digital media unit Oath appears to be in a state of change with CEO Tim Armstrong and other executives reportedly planning to leave the company.

Media reports – citing inside sources – said Armstrong’s exit would follow on the heels of Bob Toohey’s recent departure as chief people officer. Other executives said to be leaving include CFO Vanessa Wittman and Natalie Ravitz, chief communications officer.

Oath was founded in 2017 following Verizon’s acquisitions of AOL and Yahoo. Digital media brands folded into Oath include TechCrunch, Engadget, Edgecast and HuffPost, among others.

Armstrong, who headed AOL from 2009 until its purchase by Verizon, has been tasked in part to help the telecom establish an over-the-top video presence.

Indeed, after Verizon spent nearly $1 billion launching Go90, an ad-supported mobile app targeting the 18-34-year-old demo, Oath took over the app after it failed to gain traction. It was scuttled shortly thereafter.

Go90 remains a stain on former Verizon CEO Lowell McAdam, who stepped down in August.

Verizon reportedly declined to comment on the scuttlebutt.

Verizon Go90 Shutdown Cost: $1 Billion

NEWS ANALYSIS — Verizon’s short-lived attempt at over-the-top video targeting millennials on wireless devices has a price tag: $997 million.

The telecom July 24 revealed the pre-tax charges in second-quarter (ended June 30) fiscal results, which include $339 million in severance charges.

The oddly named ad-supported mobile-centric video app launched in 2015 with much fanfare and hundreds of millions of dollars invested.

One of the app’s first (and expensive) series was a reality-competition show produced by Ben Affleck and Matt Damon, dubbed “The Runner” – which had the misfortune of bowing at the same time of the global Pokémon Go craze.

Go90 did score a creative hit with Kobe Bryant’s Oscar-winning short film Dear Basketball.

The end of Go90 underscores Verizon’s (and exiting CEO Lowell McAdam) failure to create a standalone streaming video platform capable of competing against Netflix, Amazon Prime Video, Hulu — or even OTT video.

Earlier this year, the telecom folded Go90 into its Oath platform, which includes ’90s relics AOL and Yahoo, in addition to HuffPost, Engadget, Tumblr and TechCrunch.

Indeed, Verizon reported acquisition and integration-related charges of $120 million, primarily related to Oath in Q2.

Separately, Verizon disclosed it lost 37,000 net Fios Video subscribers in Q2, citing ongoing consumer cord-cutting of pay-TV service for competing over-the-top video platforms not named Go90.

The telecom lost 15,000 net Fios Video subs during the previous-year period. Through the first half of the year, Fios Video shed 59,000 net subs compared to 28,000 subs last year.

In total subscribers, however, Fios Video ended Q2 with 4.56 million subs – down 106,000 subs from 4.666 subs last year.

Reflective of consumer adoption of OTT video, Verizon said Fios broadband added 43,000 net subs, down 12.2% from 49,000 broadband sub additions last year. Through the first six months, broadband subs increased nearly 30% (109,000) from 84,000 last year.

Verizon ended the period with 5.959 million broadband connections, up nearly 4% from 5.737 million connections last year.

Perhaps sensing his unexercised stock options, McAdam – who regularly skipped fiscal calls in favor of kowtowing investor events – said Verizon is “extremely well-positioned” for the future.

“Our financial and operating results for the first half of 2018 were strong, as evidenced by service revenue, earnings and operating cash flow growth delivered in a highly competitive marketplace,” he said.

McAdam conveniently ignored Go90’s after-tax impact of about $900 million, or 20 cents per share.

Verizon Officially Pulling Plug on Go90 Streaming App

As expected, Verizon is reportedly calling it quits on Go90, the oddly named ad-supported mobile-centric streaming video app launched in 2015 with much fanfare and hundreds of millions of dollars to the Millennial market.

“Following the creation of Oath [which includes Yahoo and AOL], Go90 will be discontinued,” Verizon said in a statement first reported by Digiday.com. “Verizon will focus on building its digital-first brands at scale in sports, finance, news and entertainment for today’s mobile consumers and tomorrow’s 5G applications.”

Tim Armstrong, CEO of Oath, earlier this year alluded to Go90’s pending demise at the Recode tech confab in Southern California.

The end of Go90 underscores Verizon’s (and exiting CEO Lowell McAdam) failure to create a standalone streaming video platform capable of competing against Netflix, Amazon Prime Video, Hulu – or online TV.

While Verizon still has exclusive mobile streaming access to the Super Bowl, the nation’s largest wireless telecom with more than 150 million subscribers continues to struggle in OTT video.

In 2014, the company – along with Redbox – shuttered Redbox Instant, an ambitious platform aimed at melding disc rental with streaming video.

With both companies unwilling or unable to enter the content arms race against Netflix & Co., Verizon – backed by a dedicated staff of Go90 employees – reportedly spent more than $200 million on original short-form content for the platform.

One of the service’s first big series was a reality-competition show produced by Ben Affleck and Matt Damon, dubbed “The Runner”.

The series offered a $1 million prize to one contestant capable crossing the country unnoticed over a 30-day period while eluding eight two-person chase teams following clues.

The show had the misfortune of launching just as the Pokémon Go augmented reality game was becoming a summer cultural phenomenon among smartphones’ biggest target market: teens and Millennials.

Go90 did score a creative hit with Kobe Bryant’s Oscar-winning short film, Dear Basketball. Less so, apparently, with targeted audiences.

 

 

Verizon CEO Succession Underscores OTT Video Failure

NEWS ANALYSIS — Verizon June 8 announced that longtime CEO Lowell McAdam is retiring at the end of the year, and will be replaced by Hans Vestberg, EVP, president of global networks and CTO, on Aug. 1.

McAdam, who will serve as executive board chairman through the end of the year, after which he will employ a golden parachute as non-executive chairman, leaves a legacy of disappointment when it comes to succeeding in over-the-top video.

Unlike rival AT&T, which acquired DirecTV Now and is attempting to close a $85 billion purchase of Time Warner to fuel its OTT video aspirations, Verizon has limped along acquiring yesterday brands (AOL and Yahoo combined into Oath subsidairy) while stumbling to rollout a viable proprietary online TV service or competitor to Netflix, Amazon Prime Video or Hulu.

That Verizon needed a new CEO, one with digital tech experience who could do more than skip fiscal calls while making the rounds of Wall Street gabfests, was driven home last month when McAdam raised the white flag of defeat.

After the failed launch of Go90, the oddly named mobile-centric video app that attempted to connect with younger audiences through quirky programming, McAdam said Verizon going forward would partner with a third party in future OTT video plans.

It tried that in 2013 with “Redbox Instant by Verizon,” a hybrid strategy aimed at melding packaged-media rentals at kiosks with subscription streaming video. The service lasted just 18 months, with Redbox admitting the erstwhile Netflix competitor was “not as successful as we hoped it would be.”

Now, Verizon wants to piggyback on someone else’s OTT ground game.

“Let them be very good at what they do,” McAdam said last month at a market confab. “We’ll add digital content to that mix, and we’ll position ourselves for where we become more of an OTT video culture versus the linear model that we have today.”

Indeed, McAdam, like a lot of pay-TV executives, is facing exponential churn among his linear Fios TV subscribers in a rapidly evolving SVOD landscape.

“We’ll integrate our Oath assets into the linear assets that they have and bring the full package to customers,” he said.

While sounding like so much digital Malt-O-Meal, the fact remains Verizon remains on the outside while rivals Dish Network (Sling TV), AT&T (DirecTV Now), Charter (Spectrum TV Plus), Google (YouTube TV) and Comcast (X1 with Netflix) carve up the OTT landscape within the shrinking linear TV ecosystem.

Maybe Swedish-born Vestberg, who once ran mobile network pioneer Ericsson, will succeed in walking the talk.