Verizon's ad-supported OTT pricing may signal new business models to come

Telecom giant Verizon Communications (NYSE: VZ) completed its $4.4 billion deal to acquire AOL, meaning that with video delivery and an owned-and-operated programmatic advertising platform in place, it's now poised to launch its over-the-top streaming service for Verizon Wireless customers. But can Verizon's ad-supported, subsidized data model compete with the bevy of OTT providers jumping into the space?

Verizon purchased AOL specifically to help power its ad-supported mobile OTT service. That's been clear from the onset of the deal. But Verizon also revealed Tuesday in a conference call that advertisers will also help subsidize data costs that subscribers might otherwise incur when streaming video to their mobile devices.

The new business model may resolve concerns about the amount of data that users might consume when watching Verizon's new video service. Then again, it could be a clunky retrofit--subsidized streaming for mobile just hasn't been tried before at scale. Still, with 78 points of presence worldwide, VDMS, the streaming delivery side of Verizon's online video aspirations, is setting itself in place to meet expected demand.

New OTT business models are likely being dreamed up by most providers hoping to differentiate themselves in what's becoming a neck-and-neck race for viewers. But so far, SVOD and AVOD (subscription  vs. ad-supported video on demand) have been the dominant models. Transactional video on demand (TVOD) has fallen far short of expectations, a panel at the recent OTT Executive Summit event in New York City noted; but some new entrants, regardless of their business model, just haven't attracted sales.

"I've seen more failures than success," said Steve Harnsberger, VP of global business development for Imagine Communications, in a session on OTT versus other online video platforms. "(For example) we worked with a large retailer that wanted to compete with (Amazon) Prime but didn't realize how much content licensing cost."

Verizon's new mobile video service will likely include live-streamed content, including NFL games (based on Verizon's deal with the league). On-demand content will be prevalent as well, with Verizon incorporating "emerging" content from services like multichannel network AwesomenessTV.

Beyond the subsidized data model, Verizon may do well to offer well-niched content--not just live-streamed sports, but other genres as well. And a decent search and recommendation engine wouldn't hurt, either.

"The more long-tail or niche-specific content you have, the better," said Bonnie Optekman, founder of Theater Streams and an NBCUniversal veteran, during an OTT Summit panel session. "Content discovery is very important, but there is still no complete solution to it. (Discovery must be) something that doesn't force you to leave the walled garden you're in, but lets you know what is out there. Unless you're Netflix … it is a huge burden on marketing."

For more:
- see the press release
- and FierceWireless' coverage
- WSJ has this story

Related articles:
Verizon snaps up AOL for $4.4B, locking in mobile video, advertising tech
AOL revenues climb 7% to $625.1M on strength of video advertising, programmatic strategy
SeaChange's Samit: Business models, legal issues hold back IP video technology

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