This week, Verizon closed its acquisition of Yahoo! and plans to use Yahoo!’s video assets as a “platform to test over-the-top (OTT) video”, with a live TV streaming service – AKA a virtual Multiple Systems Operator (VMSO) – launch expected in the coming months. Yahoo!’s video assets include blogging platform, Tumblr, and a slate of original programming coupled with TV catch-up service, Yahoo! View and programmatic video advertising platform, BrightRoll. 

Verizon has been dipping its toe in the waters of the OTT space since 2014, when it acquired Intel’s online video streaming unit, OnCue, for $200m. This acquisition was intended, in part, to support Verizon’s FiOS hybrid-IPTV service, but Verizon also launched an ad-funded millennial-focussed video streaming service, go90, in October 2015. By March 2017, Verizon had spent nearly $200m on programming for go90 since the service’s launch, according to industry sources.

While the virtual MSO space (addressed in our latest report ‘The virtual MSO: Virtually changing the US TV market’) is becoming increasingly crowded, Ampere research suggests that a virtual MSO offer may represent a substantial up-sell opportunity across Verizon’s expansive base of more than 100m mobile subscribers. In our latest survey, more than 80% of Verizon mobile subscribers took a pay TV service, but fewer than 25% of these subscribers took a TV service from Verizon. 

A virtual MSO (VMSO) service from Verizon may also appeal to those same customers, providing it is targeted correctly. Verizon subscribers are cost-sensitive, and heavily influenced to take a TV service by its price-point, followed by the selection of TV shows and box-sets available. They are also susceptible to bundled offers. Verizon’s mobile subscribers without a bundled TV service are, therefore, a strong target, as virtual MSOs typically have lower entry-level prices than their traditional TV counterparts, and a subsidised bundle including Verizon’s new VMSO could be positioned as a compelling proposition as traditional pay TV subscriptions decline.