Verizon's Stratton: Content model 'absolutely needs to be disrupted'

kids mobile phones (pixabay)
Customers are increasingly leaving linear TV services, but whether wireless carriers can tap that trend is unclear

The digital content market is a “bubble” that “needs to be disrupted,” according to John Stratton, Verizon’s executive vice president. But whether the nation’s largest wireless carrier can help burst that bubble is far from clear.

Like its primary rival AT&T, Verizon is moving aggressively into digital content and advertising as growth of the traditional U.S. mobile market slows to a crawl. The operator has spent more than $10 billion to compile an array of assets such as AOL, Yahoo and Complex Media, and earlier this year it combined some of those businesses under the brand “Oath.”

Speaking at an analyst conference this morning, Stratton suggested that part of that strategy is to enable consumers to access video content they actually want instead of paying for monthly content bundles that include plenty of content they aren’t interested in.

“If I look at the content model without regard to our approach or AT&T’s approach—speaking more generally about the content market—this is a market that absolutely needs to be disrupted,” said Stratton, who oversees Verizon Wireless, Verizon Consumer Markets and other businesses. “You buy content from a particularly company and it may have certain minimum penetration requirements, so regardless of who’s actually watching the programming you’re going to be required to make sure that effectively 80% of your subscribers are paying for it, regardless of whether they watch it or not … This has been going on for years and years; the content costs rise significantly year after year, and it puts incredible pressure on the consumer.”

Indeed, the nation’s largest cable operators have struggled mightily to retain their customers in recent quarters. The top publicly traded linear pay TV platforms may have lost 1 million subscribers in the third quarter, as FierceCable recently reported, after adding a modest 29,000 during the same period a year prior. And those TV providers bled 978,000 customers during the second quarter of 2017.

Whether Verizon or any other wireless carrier can take advantage of that exodus is unclear, however. U.S. mobile network operators have struggled to monetize content since the days of ringtones, and Verizon’s Go90—an OTT offering targeted directly at millennials—doesn’t appear to have built much of a following.

Stratton made clear that Verizon isn’t reconsidering its pursuit of digital content, however.

“I think with the increasing impact of technology—IP delivery, streams, direct-to-consumer, OTT—this is a model that will tip over,” he continued. “And for Verizon, we are happy to see that happening, to aid its acceleration, because we think that for too long customers have been paying too much for content they don’t choose to watch.”

This story was updated Nov. 7 to clarify that Stratton was speaking at an analyst conference.