December 7, 2011
Verizon To Compete With Netflix?
Netflix may be in trouble as a new competitor to streaming online video decides to move into their territory. Verizon Communications, according to people who have been briefed, has been planning to move into a new standalone service that streams movies and television shows over the web.
Reuters reports that the new service would be offered outside of its current FiOS markets, where they offer broadband internet and TV packages. This new service would be made available to 85 million U.S. households.
Plans for the service are still in the works, but insiders who have knowledge of the plans say that the movie packages would be similar to Liberty Media´s Starz Play and Viacom´s Epix or could partner with Disney or Viacom for their children´s programming.
Plans with these content providers may be trouble for Netflix. Their contract with Epix for exclusive online-streaming content runs out September 2012 opening up other services to negotiate deals with Viacom for Epix packages from Paramount, Lions Gate and MGM studios. Viacom´s Chief Executive Phillipe Dauman has been open about other broadband service providers negotiating with his company.
According to the confidential sources at Verizon, the company has been working on these deals with programmers over the last two years. Currently the biggest stumbling block has been the discussion of fees and the programmers are concerned how working with Verizon would hurt their relationships with cable operators.
Cable operators are concerned about a company like Verizon offering web based television programming. They are afraid that customers will choose to not have the premium cable channels and “cut the cord” to the cable company.
Carlos Kirjner, an analyst at Bernstein Research, told Reuters, “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.”
Netflix, though, doesn´t seem too concerned about the new competitor. Netflix CEO Reed Hastings said “the competitor we fear most is HBO Go” which offers streaming service for customers of the pay TV channel owned by Time Warner.
This move by Verizon is one step closer to an initiative called TV Everywhere, which makes cable networks available on the web to paying subscribers. Content providers and distributors have been working on this content distribution model for the last year.
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