Friday, April 17, 2015

FIOS Favors Smaller Custom Packages

Following the trend of OTT rivals like Sling TV and Playstation Vue, Verizon's FIOS team is offering subscribers smaller, cheaper cable net packages to buy.  It is a clear attempt to win back cord cutters who have felt that their cable service has gotten too expensive.  And it seems the best way to deliver a cheaper package is to not include sports networks in their base line-up.

According to Multichannel, " Customers who sign up for Custom TV will get a “Base” (and ESPN-free) package with more than 35 channels – including the broadcast channels, CNN, HGTV, AMC, Food Network – plus two of seven available thematic 'Channel Packs' that each offer ten or more additional channels."  While not a true a la carte approach, it seems to be the next best thing.  And unlike some other OTT services, it does include broadcast networks.

The challenge for Verizon FIOS might be that today's millenial audience doesn't care for linear programming anymore and have already been weened off of traditional cable viewing.  Current FIOS customers might see this as an opportunity to cord shave or to cut back their service to a lower priced level.  This could be a big hit to the revenue line in the budget.  And costs of networks could rise, especially with sports nets that contractually may demand to reach 90% or more of the available basic subscriber base.  Failing to reach that penetration level could lead to license fee per sub increases.

Still, given today's digital climate, moving to a more flexible packaging scenario may be the only way to compete on a new playing field.  Further differentiation is necessary for FIOS and its cable brothers to maintain, or even grow, its subscriber numbers.