Verizon Gets Bitten Hard By Digital Streaming

Verizon Gets Bitten Hard

For years, the name ‘Verizon’ has been associated with quality. They’re a trusted company in a competitive industry, and they’re universally seen as one of the biggest players within their chosen field of industry. All that might be about to change. With the company’s first quarterly figures for 2020 now available and difficult questions being asked of its earnings and its plans for the future, it looks as if the future of the firm might be headed for choppy waters. 

There’s no way to dress up the information contained in the report. During the first quarter of the year, Verizon has lost 84,000 paying subscribers from its Fios TV platform. As if that weren’t bad enough, it’s also shed 68,000 paid mobile phone subscribers. The quality of its products and services may not have changed – but it appears that the buying habits of its customers have. There are a number of potential reasons for the issue – including the obvious one that the whole world is facing at the moment – but a permanent change in the way that the public consumes digital media is probably the biggest factor, and that might mean curtains for its paid TV platform. 

The change in habit we’re talking about is, of course, streaming television services like Netflix and Amazon Prime. Like an online slots website offers 700 slot games in one place and makes it hard for traditional casinos to compete on price, a streaming service offers thousands of TV shows and movies in one place for a better price than the average TV subscription. We’ve already seen the effect that online slots websites and digital casinos have had on real casinos. Not every casino will go out of business because of the existence of online slots, but some of them will. In the same way, not every traditional tech firm will go out of business because of streaming, but some will. Fios TV might be one of them – and that could have a knock-on effect on the Verizon brand as a whole. 

Because of the disappointing figures, the company has already taken the decision to pull its revenue guidance for the full year – a step that’s normally only taken in the direst of emergencies. It will presumably issue new guidance in the near future, but that guidance is likely to paint a picture of the firm’s fortunes that’s far less rosy. Even though the share price performed slightly better than expected at $1.26 per share, which exceeded the average estimate of $1.22 from professional forecasters, it didn’t make up for the fact that total operating revenue is down by over one and a half percent from the year before. That loss could become much sharper if the trend for cancellations and lost subscriptions continues. 

Small discrepancies make big differences when it comes to the value – or the potential value – of multi-billion dollar companies. That 1.6% difference means that instead of posting revenue of $32.27 billion, which was the expectation of investors, it actually posted revenue of $31.6bn. That’s a difference of over five hundred million dollars, and even when dealing with numbers this large, it’s still a huge amount of money to be missing out on. Verizon can weather the storm for now – and their hopes for doing so in the future may depend upon how well it can adapt and provide for the coming of 5G.

At the same time as confirming the drop in subscribers, the company’s CEO was quick to confirm that their plans to deploy 5G haven’t changed and will continue on schedule. Their supply chain is already in place, and they’re confident that when consumers can see the potential of 5G, they’ll come to buy it in big numbers. If he’s right, he’ll be hoping that more customers come to Verizon than go elsewhere for their service. A large influx of new buyers would be enough to turn the company’s fortunes for 2020 around and finish the year in a much stronger position than the way they’ve begun it. Some forecasters had already predicted that there would be a disappointment coming for Verizon investors when the numbers were published – but almost nobody suspected that the numbers would look quite this bad. 

Another factor that might work in Verizon’s favor later in the year is its partnership with Disney, which allows them to offer special deals to customers on Disney Plus subscriptions. As you’ve probably already seen reported elsewhere, Disney has managed to attract more than fifty million subscribers to their new platform since launching it late last year, and although Verizon’s deal is only available in the USA, it’s thought that a significant number of American subscribers will have come to Disney via Verizon. The specific terms of the deal are unknown, so Verizon’s cut of the money isn’t a piece of information that’s readily available, but if it resulted in a cash windfall that landed during the year’s second quarter it would make the Q2 figures much more comfortable reading for investors. 

Verizon is an enormous company with connections that most people aren’t even aware of. Yahoo is a Verizon service, as is the popular HuffPost website. They have various means of making money that aren’t associated with Fios TV, and they’d also survive even if their mobile phone service collapsed completely – as unlikely as such a scenario might be. If they’re to remain healthy and profitable, though, it might be time to accept defeat on their paid television subscription model. The masses spoke long ago when it comes to subscription television, and the trend of ‘cutting the table’ isn’t going to end any time soon. With the market becoming ever more saturated by new streaming services and consumers splitting their money between numerous different companies, they’re cutting subscription TV payments elsewhere. Verizon has now seen the full effect of that, and even though they have four million connected customers at the moment, they’re surely anticipating a steady drop in the months to come. 

Streaming is changing the game forever when it comes to television and entertainment, and it seems that not even the biggest and most established names are safe from the effects of that. If it can happen to Verizon, it can happen to anybody. 

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