The diverging video strategies of Verizon Communications (NYSE: VZ) and AT&T (NYSE: T) will be on display this week as the companies' finance chiefs face investors. On the one hand, AT&T will have a chance to flesh out its plans to integrate DirecTV following the close of its $48.5 billion deal in July for the pay-TV provider. Meanwhile, Verizon is likely to discuss the early returns of its Go90 over-the-top mobile video service, which launched nationwide to all wireless customers earlier this month.
AT&T CFO John Stephens has said that he is skeptical of Verizon's strategy. "Verizon is not going to have the broadband capabilities," he said last month at an investor conference, according to a Seeking Alpha transcript of his remarks. "They don't have the satellite or the scale in delivering and negotiating with content providers. So our approach is this integrated model."
Meanwhile, as The Wall Street Journal points out, Verizon has ruled out expanding its video play by buying Dish Network's (NASDAQ: DISH) satellite TV business (though its chief executive is open to some kind of deal for Dish's spectrum). Verizon spent years pulling together different assets, including its $4.4 billion deal for AOL and its advertising technology, to make Go90 a reality, and analysts will likely want to know more details about adoption, usage and the future content offerings for the app, which for now is free and has an advertising-based revenue model.
"For the first time we are seeing a divergence in strategy," Barclays analyst Amir Rozwadowski told the WSJ, adding that Wall Street is still trying to discern the companies' strategies. "We are trying to distill what is success," he said.
AT&T has argued that now that it controls DirecTV, it is in a much better position to renegotiate content licensing deals with content owners. AT&T also wants to make it easier for consumers to get TV content on their smartphones and tablets without having to worry about whether or not they will be able to do so because of content rights. AT&T said earlier this month it renewed its carriage deal with Viacom following the expiration of its carriage deal for U-verse on Sept. 30. The move ensures both U-verse and DirecTV customers will still be able to watch Viacom channels like MTV and Comedy Central. Terms of the agreement were not announced in the carrier's brief statement but could come up when AT&T reports earnings Oct. 22.
AT&T may eventually merge the DirecTV business with its U-verse video platform as it pushes bundles of wireless, video and broadband offerings.
Verizon is hoping that its "snackable" content aimed at millennials will help Go90 stand out from a crowded field of video competitors, including Amazon (NASDAQ: AMZN), Hulu and Google's (NASDAQ: GOOG) YouTube. Verizon's rivals have been skeptical that a carrier can successfully drive an OTT model.
- see this WSJ article (sub. req.)
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