LAS VEGAS--Verizon Communications (NYSE: VZ) views its Flex View on demand service as a necessary piece of its FiOS offering because it keeps customers from churning. In fact, a Verizon executive said that FiOS customers who use Flex View on demand are three times less likely to churn than customers who do not use the mobile service.
Speaking at the National Association of Broadcasters conference panel on TV Everywhere held here, Maitreyi Krishnaswarmy, director, interactive video services at Verizon FiOS TV said that people who view Verizon FiOS content on the iPad or other mobile devices average 47 minutes of engagement per session. Likewise, customers who view content on Microsoft's (Nasdaq: MSFT) Xbox average 58 minutes per session. "Engagement is high," Krishnaswarmy said.
Krishnaswarmy noted that this compares to the average household, which views about 4 hours of TV per day. However, she said that it's hard to measure whether that statistic is meaningful engagement because many households have the TV on even if no one is watching it. She said that tablet or smartphone viewing is considered engaged viewing because these devices are more personal.
SNL Kagan Senior Analyst Ian Olgeirson noted that while many companies are offering TV Everywhere services such as Verizon's Flex View service because it strengthens the relationship with the content provider and the customer, progress has been slow and revenue models are uncertain. But at the same time, programming costs are rising, and that's creating tension in the market. "Operators expect a 10 percent or more increase year over year in content costs, especially sports," Olgeirson said. "There are these rising programming costs but operators are not seeing widespread introduction of incremental revenue models."
Krishnaswarmy said that operators such as Verizon believe the content does drive revenue in that it prevents churn. However, for content providers, finding a sustainable revenue model is more critical. "For content companies to have an incentive for multiscreen rights they need to see new revenue stream. We care about getting the right content to a customer and not giving them a dead end," she added.
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