Verizon Loses 67,000 Pay TV Subscribers in Third Quarter

Verizon CEO Hans Vestberg
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Verizon CEO Hans Vestberg

The telecom giant, led by CEO Hans Vestberg, says the figures reflect "the ongoing shift from traditional linear video to over-the-top offerings."

Telecom giant Verizon on Friday reported that it lost 67,000 net pay TV subscribers for its Fios consumer video service in the third quarter, compared with a loss of 63,000 in the year-ago period and a loss of 52,000 in the second quarter.

Fios, which competes with cable and satellite TV services, ended September with 4.2 million total video subscribers in its consumer unit, whose subscriber decline in the latest period compared with a 1,000-subscriber gain in Verizon's business services unit. The subscriber losses were "reflecting the ongoing shift from traditional linear video to over-the-top offerings," Verizon said.

The company's broadband service added 36,000 subscribers in the third quarter, including 30,000 in its consumer and 6,000 in its business services unit, compared with 54,000 in the year-ago period.

Earlier this week, Verizon on the wireless phone front unveiled a promotional deal to offer the upcoming Disney+ streaming service to its mobile users for free for a year under a pact with Walt Disney that analysts say will boost the service's user figures. 

Vestberg on an analyst call Friday touted his giveaway pact with Disney as mutually beneficial. "We have a great network, we have distribution. We can partner with the best partners. It's a win-win. They are gaining a lot with us, as we gain as well," he argued.

Vestberg pointed to similar mutual gains from an earlier deal to bundle a free Apple Music subscription for six months as a perk for certain unlimited mobile plan subscribers. "We learned a lot from our exclusive agreement (for Apple Music). We're very picky who we do these partnerships with. We do it with the best brands. We offer a base of distribution that no one else has in this country. It's much more of a win-win than you might believe," he told analysts.

Vestberg declined to say how many Verizon phone users paid for Apple Music after the free six-month perk lapsed, as a measure of how many new subscribers Disney may expect to sign up after Verizon subscribers no longer get the studio's new streaming service for free. But he added both entertainment brands are not comparable as Disney+ as a streaming service is data-heavy and requires an unlimited mobile plan, while Apple Music is more light audio.

After its acquisitions of AOL and Yahoo, Verizon created a new division, Oath, which was then expanded further to become Verizon Media Group and encompass all of its media and advertising businesses. For the third quarter, Verizon Media Group's revenue fell 2 percent from the year-ago period to $1.8 billion. "Gains in native and mobile advertising continue to be offset by declines in desktop advertising, though the business is building momentum in key areas," the company said.

Verizon posted third-quarter earnings of $5.3 billion, or $1.25 per share, up from $5.1 billion, or $1.19 a share in the year-earlier period. Adjusted earnings per share also rose and beat Wall Street consensus expectations. Quarterly revenue rose 1 percent to $32.9 billion.

Verizon had for some time planned to launch a live TV streaming service for young wireless users who are cord-cutters or cord-nevers, but then decided to instead offer other over-the-top (OTT) services via its platform. That is why the company earlier this year unveiled a partnership with Google's YouTube TV streaming service, serving as a re-seller. 

Asked about competitor AT&T's strategy of bundling wireless services with content, such as HBO, Verizon CFO Matt Ellis earlier this year said that "the most important thing to customers in wireless is the quality of the network experience," adding that while others bundle video and the like, "we continue to lead in phone gross adds and churn."

Oct. 25 6 a.m. Updated with comments by Verizon CEO Hans Vestberg made during an analyst call.