Verizon Wireless' (NYSE: VZ) forthcoming over-the-the-top mobile video service will support sponsored data, with advertisers subsidizing the cost of consumers' video consumption, according to a senior Verizon executive.
"Ad-sponsored data is part of the product offering," Marni Walden, EVP and president of products and new business innovation at Verizon, said during a conference call with the media to discuss the completion of Verizon's $4.4 billion deal to buy AOL.
Verizon plans to launch the OTT video service sometime this summer, and Walden provided a preview of the product and also discussed, along with AOL CEO Tim Armstrong, how the telecommunications giant will incorporate AOL.
Walden's comments on the ad-supported data consumption echo those of Verizon Communications CFO Fran Shammo. "We're going to bring a product to market where people can enjoy that product and they won't necessarily pay for it through their data bundle," he said in May during an investor conference, according to a Verizon transcript of his remarks. "Some people have called it the sponsored data model, but it's really going to be monetized through the advertising model."
Walden said on the call that such a business model would comply with the FCC's net neutrality rules. "We believe we're well within the ability to do that within the rules we need to abide by," she said. She also said there would be "some premium offers" with the video product as it evolves.
While Walden did not say when exactly Verizon would launch the mobile video offering, she said Verizon is in the process of securing deals with content providers for live content, "emerging" content that will be mostly Web-based, and on-demand content. She said Verizon is "planning on having a number of fresh titles" with the service, but she did not elaborate.
The service will work over Wi-Fi networks and mobile networks, including competing wireless networks in the U.S., though Walden said the service will work best on Verizon's network. Verizon, for instance, will be the only one using LTE Multicast technology to stream live events, she said.
Verizon does not have plans to launch the service globally, at least not initially, Walden said, but she added that what is "so exciting" about the AOL deal is that it gives Verizon global capabilities to launch and support advertising. "We think that's the next obvious step," she said.
Live content will encompass things like sports and concerts, Walden said. In April Verizon announced content deals with ESPN, CBS Sports and several other college-sports-focused platforms. The deal with Disney's ESPN, the priciest of all cable channels, isn't full-fledged--the Verizon service is only acquiring select college football games and "30 for 30" documentaries. But Verizon did license the full CBS Sports portfolio and the ACC Digital Network, as well as digital video services Campus Insider and 120 Sports. Verizon has also licensed content from Viacom, as well as YouTube programming network AwesomenessTV.
As part of the AOL deal, Armstrong will become the head of Verizon Digital Media Services, Walden said. Bob Toohey, who had been president of the unit, will now report to Armstrong.
Walden said Verizon intends to become the No. 1 "global media-technology company" for content creators, advertisers and consumers. She said AOL's advertising technology will let Verizon create value ad revenue on top of its access networks, especially for the OTT video product.
Armstrong said he thinks that in the coming years, 80 percent of consumers' media consumption will be over mobile devices and that joining forces with Verizon will help AOL take advantage of that trend. He also said that the content delivery network and video delivery markets "will be one of the most important for the future." Armstrong said that AOL's global reach and advertising technology will be used for both video on demand (VOD) or audio and video on demand (AVOD) services.