Verizon continued its aggressive expansion into media with the announcement that it will buy a 24.5 percent stake in AwesomenessTV, a digital video company owned by DreamWorks Animation that targets teens and preteens. The deal values AwesomenessTV at $650 million.
Verizon said it will team with AwesomenessTV to create "a premium short-form mobile video service featuring leading talent in front of and behind the camera." The service will operate as an independent brand "and feature transactional content" as part of the carrier's Go90 offering. Verizon will fund the project.
The new service will be exclusive to Verizon's platforms initially, while AwesomenessTV will hold rights to sell the content in other markets.
The valuation indicates Verizon paid $160 million for the stake, Wells Fargo Senior Analyst Jennifer M. Fritzsche wrote in a research note.
"While $160 million is small change for a company like Verizon, we believe this deal gives another clue where VZ is going," she wrote. "We believe ad-supported video service remains a top strategic focus for VZ (if not THE top focus). We continue to expect VZ to do tuck-in acquisitions and investments to further strengthen this initiative…."
Indeed, Verizon continues to move aggressively into media and advertising in an effort to offset slowing growth in a saturated U.S. smartphone market. The operator spent $4.4 billion last year to acquire AOL and its media assets, and last fall it launched Go90, an OTT video service that it immediately backed with an $80 million marketing campaign. Earlier this year it expanded Go90 to include sponsored content, enabling content providers and advertisers rather than consumers to pay the freight for mobile data.
Verizon CFO Fran Shammo last month made no bones about the carrier's strategy, saying that "we have to be able to have (users) consume more, but monetize that consumption in other forms. And that's how we got to the Go90 model, and that will be monetized through the advertiser and that will of course increase revenue and that will contribute to the bottom line."
The carrier's video service is apparently struggling to find much traction, however. UBS analysts said last month that Go90's best showing among all iOS apps clocked in at roughly No. 300, ranking twentieth among entertainment apps. The offering will be "hard-pressed to mount a meaningful challenge to mobile video and social networking leaders YouTube, Facebook, Instagram, Snapchat, Netflix and Hulu," UBS wrote.
- see this Verizon press release
UBS: Verizon's Go90 off to a slow start, will be 'hard-pressed to mount a meaningful challenge'
Verizon's Shammo: We're interested in ad revenues, not unlimited data plans
Report: Verizon to launch 'Go90' mobile OTT video service in the coming days