Where Verizon went wrong with go90
Last week Verizon, the US’s second largest telco provider with 116 million wireless subscribers, announced the closure of its pioneering mobile-first video streaming service which launched in 2015. Go90 was launched on the back of a $200 million purchase of Intel’s unreleased streaming service, OnCue, with a mission to create mobile-centric content for digital natives (or millennials as middle-aged C-suite executives still seem intent on labelling what are, in reality, disparate demographics who collectively all grew up in the digital era). Go90 was all about fulfilling a perceived gap in the market for edgy original content for an arbitrarily defined demographic, which was expected to respond favourably to original content based around short and mid-form video and social talent. It has been disparagingly referred to as a substandard YouTube.
The last 12 months will go down as a pivotal moment in the evolution of telco video content strategy. On December 14th, 2017 the head of the United States Federal Communications Commission (FCC) Ajit Pai removed the restricted carrier status with which US broadband providers had been regulated for the previous eight years. These restrictions had prevented Telcos, as the cornerstones of digital infrastructure, from leveraging their key role in the digital economy. Internet service providers (ISPs) were suddenly now able to strike partnership deals with digital distributors such as Netflix, to gain a percentage of their revenues which they are helping to deliver through their infrastructure. For the Telcos, it is an opportunity to move beyond being mere “dumb pipes” and to start the process of becoming perceived by their client as a value-add service. This crucially allows them to pull away from their current commodification trap, which leaves them in a race to the lowest price denominator with their fellow telcos.
Distributors such as Netflix, Spotify and Facebook now find themselves in the vulnerable position of no longer being able to guarantee equality of access for their users to their services. For businesses like Netflix, which currently operates on a 7.8% net profit margin, the challenge of a sudden toll fee for retaining access to their users could decisively impact upon their financial viability. Add to this the significant debt load which Netflix operates under (currently at $9.7 billion), and the structural long-term implications of the hit to margins from accommodating telco revenue share could be of existential proportions for the pureplay streaming services.
Where Verizon went wrong with go90
Go90 was envisaged to fill a perceived need gap between Netflix and YouTube for digital native audiences. The reality is that gap is not to be filled with a service offering new content formats, it is about adapting the proven success of pay-TV formats for the on-demand contract-free and price-sensitive streaming generation. Mobile does not mean breaking the old to make way for the new, rather it is about making mobile-friendly on-demand content and programming for audiences who are used to using their smartphone as their default entertainment interface. Crucially, success in this arena is about recognising that in the peak attention economy, your content and service has to be better than the competition and; you will be competing not just with other streaming video services, but with on-demand mobile gaming, publisher subscriptions, podcasts, and music streaming services for the attention and the discretionary spend of your target consumer demographic.
We may be moving into a post-net neutrality landscape, but the age-old necessity of understanding your customer remains as relevant as ever.