Verizon’s FiOS video net additions in 4Q17
The major driver of Verizon Communications’ (VZ) wireline segment is its FiOS service. Verizon’s FiOS is a fiber-optic network service that provides users with Internet, video, and voice services. Wall Street analysts expect Verizon to see a net loss of FiOS video customers in 4Q17. Verizon has continued to face strong competition from cable and over-the-top (or OTT) video streaming companies in its footprint.
Earlier in 3Q17, Verizon lost 18,000 FiOS video subscribers compared to its 36,000 net additions in 3Q16. Furthermore, Verizon’s FiOS video penetration fell 160 bps (basis point) to reach 32.9% in 3Q17, compared to 34.5% in 3Q16. This reduction was mainly driven by softer linear TV demand as subscribers migrated to OTT offerings and competitive promotional offers.
The US online video viewing space is a crowded segment. OTT video streaming services deliver content directly to customers over the Internet as a substitute for signing up for a cable or satellite connection. Hence, OTT offerings slow pay-TV customer momentum as a result of cheaper online alternatives. This phenomenon is known as “cutting the cord.”
As the OTT video streaming service continues to rapidly add customers, traditional pay-TV companies are losing subscribers. Charter (CHTR) lost 104,000 pay-TV customers in 3Q17, while Comcast (CMCSA) shed 125,000 during the same quarter.
Amazon’s (AMZN) Prime Video and Netflix (NFLX) are the heavyweights in the online video streaming space. According to Consumer Intelligence Research Partners (or CIRP), in 3Q17, Netflix gained 5.3 million customers while Amazon added 5.0 million US Prime customers.