Verizon to Challenge Netflix, Cable TV with Video Streaming Package
December 7, 2011 10:36 AM
Verizon's Web streaming service could be available as soon as 2012
Verizon Communications Inc. is looking to compete with the likes of Netflix and Amazon by launching a video streaming service of its own as soon as 2012.
According to two sources, who have asked to remain anonymous due to the confidentiality of the talks, Verizon is currently negotiating with potential programming partners and is looking to offer a package of programming similar to Viacom's Epix. Epix is an American premium television channel that also offers a video-on-demand service.
Verizon has been reportedly talking with programmers over the last two years regarding its potential Web service. It aims to introduce the service outside of its
current FiOS markets
, which is its broadband and TV package, and could launch the service as soon as 2012.
Verizon could potentially run into some trouble with this service, though. A streaming service would challenge the traditional TV cable system, which may be a problem if Verizon Wireless decides to resell cable TV service for Comcast, Bright House Networks and Time Warner Cable Inc. in a $3.6 billion deal.
In addition to cutting the throat of its own sister company, Verizon also faces stiff competition from already-established streaming services like Netflix, Amazon and HBO Go. Some critics have already questioned how Verizon's movie/TV package will be any different from anyone else's.
"If this deal comes true, it's not clear to me what Verizon would bring to the table that is materially different to what others like Amazon offer," said Carlos Kirjner, analyst at Bernstein Research.
To compete, Verizon will have to have a monthly fee that is at least comparable to that of Netflix or Amazon. Verizon would also have to fight to negotiate terms comparable to Netflix.
"HBO and Netflix both spend between
$1 billion and $2 billion a year on content
," said Netflix CEO Reed Hastings. "If you want to compete with HBO and Netflix, you better commit to multiple-year spending between one and two billion."
Verizon seems to be pushing forward with the streaming service, however, in an effort to increase its customer base, which is currently 5 million FiOS TV subscribers. With a larger customer base, it will be easier to lower programming costs.
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