Verizon unveils “optionality” TV strategy over heavy TV subs loss

Verizon spouted all manner of nonsense to mask a disappointing set of full year 2018 results overall, underscoring a calamitous period for the US operator in video – despite proclaiming to be bang on the money with current trends. Verizon wouldn’t know a TV trend if one slapped it in the face.

Fios Video lost 46,000 subscribers in the fourth quarter to tally a total 2018 loss of 168,000 TV subs, signing off its second highest quarterly video subscriber loss, beaten only by Q3 2018’s disastrous 63,000 decline. Verizon now has 4.45 million Fios video connections and nowhere to go.

“We see the trends,” said CEO Hans Vestberg on the company’s earnings call this week, identifying only the most obvious – a shift of eyeballs from linear TV to online – while CFO Matt Ellis highlighted rising content costs as a challenging trend.

As we know, Verizon now has nothing in the way of OTT video following the closure of Go90, and Fios Video is hemorrhaging subscribers. But Verizon rang the same bell it has sounded in previous earnings calls, to the tune of familiarly vague video strategies. Sooner or later though Verizon will have to follow through – and clearly the roll out of 5G will be pivotal going forward. Right now though, 5G is being used as a distraction tactic.

“If we have the opportunity to provide customers with different ways of getting to the video content they want, we will certainly be excited about doing that. So, ever since we did choice TV, about four years ago now, we’ve been looking at ways to get customers better choice around the cost of getting their video product, and we’ll continue to do that,” said Ellis.

Vestberg echoed this point, “We will of course over time see that we can create optionality for our customers to choose between different solutions for their TV viewing. Initially, 5G Home has been focused on other cities than our footprint for Fios. But ultimately, we need to see that our customers have all the choices when it comes to how they want to consume the video.”

The word “optionality” was used numerous times during the call to describe the plan for Fios Video, alongside claims about how customers still love the linear product. We’re sure the faithful old guard do indeed still love their cable TV package, but quite frankly optionality is redundant when a business is shedding subscribers at such a rate and has become a hoist for the broadband business.

Vestberg immediately shut down a suggestion from one analyst during the call suggesting Fios broadband was not competitive enough on its own. That is despite the operator recently offering 3 months of YouTube TV for free ($40 a month thereafter) and a free Apple TV 4K or Google Chromecast Ultra device, for new subscribers looking to cut the cord.

That said, Verizon added 54,000 Fios internet connections in Q4, on par with gains from the previous quarter, to total 6.07 million, and this may well have been boosted by the TV lite approach – although we can’t help but see this as going the same way as Go90. Verizon won’t attract half a million subscribers through this strategy, on a package costing $50 a month.

Vestberg mentioned rolling out technology upgrades for Fios during 2018, most recently Fios TV One, a new video offering kitted out with a voice remote, Netflix integration and 4K UHD support. A package for Fios TV One with Fios Gigabit Connection and phone costs $79.99 a month with a year of Amazon Prime and Amazon Echo. When Fios TV One launched last month, we described it as an emergency strategy, a point which now looks more obvious.

Unlike rivals, Verizon didn’t hang on the slowdown of subscriber losses, from 63,000 in Q3 to 46,000 in Q4, which is the only silver lining from the video perspective. Video revenues aren’t broken out from total Fios revenue, which crept over the $3 billion mark in Q4, up by $60 million from Q3 and $87 million year on year, from total quarterly operating revenues of $34.3 billion, up marginally by 1%. Media revenue was down 5.8% year on year to $2.1 billion.

Net income, however, took an absolute hammering – plummeting by 89% year on year to just over $2 billion for the quarter, down from $18.8 billion last year. The primary hammer wielder was the $4.6 billion goodwill impairment of Oath, a topic which the company avoided addressing like the plague this week, as the disheveled media unit continues its phasing out process – involving the migration of technology and services over to the newly formed Verizon Media Group segment.

Over in the wireless segment, Verizon added 1.13 million subscribers, bringing its footprint to 118 million, while it waxed lyrical about how 2018 was a year of “5G firsts” – although Vestberg was not willing to put his neck on the line by providing any ballpark 5G estimates for this year.

“We have not disclosed where we are on the deployment. I can say, we’re deploying as fast as we can. And much of the work that we’ve been doing last couple of years is of course to prepare everything from the fiber to the agreement with the cities to getting the intelligent management network from the transport network, core network all out to the access. As the industry matures, the equipment is maturing for NRs so we can bring that in. And we actually have quite a lot of deployment already of those types of base stations. It’s nothing we want to disclose for competitive reasons,” said Vestberg.