Verizon last week divulged more detailed statistics on its FiOS fiber-to-the-premises network rebuild, focusing in particular on how well the telco is faring with its video-over-fiber FiOS TV service. I deconstructed some of the key pieces of data — Verizon produced Q3 06 and projected Q4 06 and Q4 10 estimates, but not much else — to figure out all the in-between time periods.
Taking some of these key benchmarks, I developed a model for how Verizon might get from here (Q3 06) to there (Q4 10). Verizon has said that it plans to serve three to four million video subscribers by year-end 2010 from a starting point of around 100,000 as of 9/30/06.
Assuming relatively smooth quarterly growth in both the number of homes capable of receiving Verizon FiOS TV service and a steady quarterly uptick in penetration (penetration for Verizon FiOS TV has grown from 1% in Q4 05 to 7% today and the company expects it rise further to 10% by year-end 2006), it’s clear that Verizon can easily make its 2010 target. Although it’s not readily discernable from the table below (which was condensed for web viewing), Verizon could break the one-million FiOS TV threshold sometime in Q2 08.
Verizon’s big success story is its FiOS high-speed data service, which should make its million-customer milestone sometime in Q2 07, up from 500K at the end of Q3 06 and a projected 725K by the end of Q4 06. By the end of Q4 07, FiOS high-speed service could pass the 20% penetration threshold.
Still, Verizon’s reach across the U.S. is limited to geographic pockets, although some of them are admittedly huge and lucrative, such as the one running up the Northeast U.S. seaboard. No matter what success Verizon has with FiOS, the competitive impact will be therefore limited by geography.
Although cable operators are likely to feel the sting of losing, or not gaining, three to four million video subscribers (only about one-eighth the number of video customers Comcast has today, btw), the high-speed sub. competition posed by FiOS could hurt worse.
High-speed customers are very high-margin subscribers for cable operators, entailing no programming fees and far fewer and simpler marketing expenses. In other words, high-speed revenues represent a lot of gravy to cable companies, not to mention the voice upsell opportunities high-speed service provides.
Posted by Cynthia Brumfield at 9:47 PM | Print | Comments (0)
Business Week’s Steve Rosenbush has this piece today about the crazy dichotomy that has emerged in valuing video-based web sites. On the one hand, VCs are pumping money into sites like VideoEgg, Sony paid $65 million for Grouper and MySpace has now been boosted (or burdened) with the famed $15 billion valuation.
On the other hand, there’s…Mark Cuban, who tends to spout off in pointed directions and this time Cuban says that only a “moron” would buy hot video sharing site YouTube.
But the truth lies somewhere between these two extremes. As Rosenbush points out, Internet video’s value can be measured along a continuum of criteria, not the simply eyeballs-captured basis used for valuing a traditional video.
While the value of each company clearly depends on its particular performance, the factors that are proving important for Net video players are quite different from those of traditional media companies. In traditional TV, more viewers mean more money. The correlation is direct, although advertisers pay a bit more for younger viewers.
That’s not necessarily so online. A smaller audience may be more valuable than a big one, if the small one does the sorts of things that advertisers like—such as clicking on ads, buying products, or visiting related content. The bottom line is that Net video companies can be judged on a wider range of factors than traditional media companies, which makes some of them worth more and some worth less.
For this reason, namely that the metrics for valuing web-based video are, relatively speaking, all over the map, it’s almost impossible to determine the market value of most Internet video sites. Right now, the market value is whatever the specific buyer and seller agree it is and no two companies seem to be cutting deals the same way.
That’s why worries over YouTube becoming just another Napster, doomed to be brought down in take-no-prisoners copyright litigation, seems somehow misplaced. It’s true that there are similarities between Napster and YouTube, but it’s also true that there are differences. The biggest difference: the record companies have learned, or should have learned, from their file-sharing fights that lodging lawsuits doesn’t boost the bottom-line.
In Rosenbush’s piece, Cuban is far more tempered than in recent days. He merely suggests that the copyright issues need to be cleared away before YouTube can sell it, and on this point he sounds wise.
“I don’t think an acquisition would be smart until all the copyright issues are decided. It would be reminiscent of BMG buying Napster,” Cuban said in an e-mail to BusinessWeek.com. “Personally, I think YouTube, like Napster, can help drive sales of products. But my personal opinion isn’t copyright law. The (unsuccessful) arguments in favor of why Napster should be allowed to continue in 1999 were similar to the ones being made for YouTube (which raises doubt’s about YouTube’s future),” Cuban said.Posted by Cynthia Brumfield at 8:34 PM | Print | Comments (0)
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