Will AT&T, Verizon Video Strategies Converge?

AT&T and Verizon have different positions on the long-term value of linear video entertainment, even if they share a similar view about its value in the near-term.

Verizon is much less optimistic about the long-term value of linear video services, and more committed to an over-the-top, mobile-capable capability, with a greater emphasis on non-real-time content (movies and prerecorded content). Verizon’s Redbox Instant initiative, even if less successful than Verizon had hoped, is one example.

AT&T seems to think linear video will be more important long term, including both streamed and linear content. AT&T’s proposed purchase of DirecTV might be viewed as evidence of AT&T’s views, as that deal would vault AT&T into the top ranks of video subscription service providers, second only to Comcast with Time Warner Cable assets.

If one believes the early winners in any shift to streaming will include today’s leading suppliers of linear video programming, AT&T’s view makes sense. Verizon seems to believe that a future market based on streaming will include a few different segments, including live content and pre-recorded material.

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The immediate practical implications arguably are seen more in terms of where each firm deploys capital, and less in any appreciable difference in product sets.

Some might say the March 2013 formation of Redbox Instant by Verizon, 35 percent-owned by Outerwall and 65 percent owned by Verizon, has not gotten huge traction in the streaming video service business, garnering less than one percent of rental volume, according to research firm IHS.

Still, early initiatives that do not blossom are common in the telecommunications business. Initiatives that fail or are halted are even more common. The point is that big telcos often place lots of bets, knowing only some will pay off.

Telcos also often try one tack early in a market’s development, and then buy their way in later, when the markets are more established.

AT&T and Verizon have chosen different paths in the past. Verizon has chosen to grow organically, while AT&T has grown by acquisition. Verizon initially was more enamored of fiber to the home, while AT&T never was.

These days, there is more similarity, as Verizon has halted further big FiOS deployments, at least for the moment, while AT&T is driving fiber deeper into the network than it has in the past.

Video strategy likewise might converge more in the future, once the streaming market reaches a more-mature phase, and demand and supply characteristics are better understood.