Verizon Gives Up on Internet-Delivered Pay TV

-CEO Says OnCue Will Be Used for On-Demand Cloud Service
-Verizon’s Future Is In Wireless and Wireline Internet, Not Pay TV

It’s official: Verizon won’t be launching a streaming pay TV service using Intel’s OnCue box and technology. Verizon CEO Lowell McAdam made that much clear this week, speaking at an investor conference.

McAdam seems to have come to the same conclusion Intel, DirecTV, Cox Communications and others have – that the economics of a broadband-delivered pay TV service don’t make sense. “We don’t think that model is particularly attractive because of the overall content cost,” he said.

The question then becomes: What will Verizon do with OnCue?

He said Verizon is looking into launching a “virtual video jukebox” that will enable users to access content in the cloud.

“If you look at the video jukebox sort of services, the Hulu’s, the Netflix, the Kindle Fires, and you create something like that that a customer can pull down from the cloud what they want when they want it and you have a much broader array of content – the YouTube types of content – and there are so many of these springing up out there these days with individual content. I think that is a very attractive model for us.”

While he was intentionally vague in his remarks, from what we can gather he’s talking about launching some sort of OTT service that blends transactional VoD with subscription-based services and perhaps even ad-supported content.

McAdam said the content would be “unbundled,” and furthermore that the service wouldn’t offer bundled content offerings to subscribers. “I think that is a very attractive model for us,” McAdam said. “But it can’t be the bundled 10 channels together and force users to take it over-the-top, the way they have done in their current linear model. We are not in the mode of having 80 channels bundled running over OnCue for Verizon, but we are in the mode of having an over-the-top play that customers can pull down what they want when they want it.”

Verizon already has an OTT play, called Redbox Instant, which is a subscription streaming service with transactional VoD and DVD perks to the subscription.

McAdam said that Verizon is in talks with broadcasters about offering access to select pieces of content a la carte, but once again didn’t elaborate. “There may be some of the content that you see from the CBS’s and the ABC’s, we hope there is and we are having discussions with them,” he said.

That comment is a bit more in line with earlier comments made by Verizon about what it plans to do with OnCue. Verizon’s CFO Fran Shammo said earlier this year Verizon plans to use OnCue for its TV Everywhere service for FiOS subscribers – not in a standalone OTT service.

Finally, McAdam hinted that the company is more interested in broadband than pay TV. “FiOS broadband is more attractive for us than FiOS video is,” McAdam said. “If you think about it, the more traffic that goes into the home the better for us because we have got the technology that is future proof.”…

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