Verizon, Netflix playing word games about market objectives

editor's corner

Jim O'NeillOh, the games companies play.

Über movie subscription service Netflix (NASDAQ:NFLX) yesterday released its first quarter financial results after the close of market, nearly doubling global earnings from a year earlier, nearly doubling subscribers in the U.S. from a year earlier, and, aw, shucks, just popping revenues 46 percent. Slackers.

CEO Reed Hastings then spent much of a multi-page letter to investors explaining why the company's continued success-it's seen year-over-year subscriber additions in excess of 25 percent for the past eight quarters, Y-O-Y revenue growth in excess of 21 percent over the same period, and Y-O-Y EPS growth in excess of 29 percent for those eight quarters as well-really shouldn't be seen as a challenge to pay-TV operators.

Hastings wrote: "Given what's happened in the music and newspaper industries, producers of movies and TV shows naturally enough fear Internet services will hurt their existing business. That fear was heightened last year when, during some quarters, total MVPD households in the U.S. contracted for the first time in history..."

But, he said, "the data shows that Netflix is a supplemental channel to MVPD. While Netflix is likely to show huge growth again this year, we think MVPD cord cutting will be minimal to non-existent."

He also made note that one CEO of an MVPD "Characterized Netflix as ‘rerun TV,'" and acknowledged that the CEO was "fundamentally correct."

Of course Netflix is in the process of expanding its own original contet with it's mega-bucks deal for the drama "House of Cards," and a Hastings' note that the service won't likely stop there, choosing to experiment with "two or three similar, but smaller, deals so we can gain confidence that whatever results we achieve are repeatable."

And then they'll stop chasing their own original content, right?

Not likely.

Verizon (NYSE:VZ) also spent some time since its earnings release last week saying "no, no" when what it really was saying was, "well, sort of."

The company was asked by Reuters about its plans for over-the-top delivery, which EVP and CFO Francis Shammo neatly sidestepped by saying "Our concentration is to expand our penetration for FiOS right now," adding that OTT was "something that we've looked at. It's not something that's top of mind for us."

Verizon, in case you missed it, at NAB introduced a product that could easily be used to help it step outside its service footprint to deliver OTT content, Verizon Digital Media Services.

And, while Shammo was saying "no, no" to OTT, he also was saying "yes, yes" to a service that would make it even easier for Verizon to slip outside its FiOS TV service footprint: delivery of FiOS TV content to mobile devices like the Apple (NASDAQ:AAPL) iPad and iPhone, à la Time Warner Cable and Cablevision's iPad apps.

How to get content from its FiOS TV service to its mobile devices was "the bigger issue on our mind," he said. And how to get that content to any mobile device anywhere can't be far behind.-Jim

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