In the months leading up to the November debut of Disney+, Disney’s various entities weren’t the only ones helping to boost the OTT offering through major marketing and promotional pushes. The media and entertainment giant found a friend in Verizon, too.
A wide-ranging partnership between Disney and the telco, inked last summer, offered certain Verizon customers a free year of Disney+ if they subscribed to the company’s unlimited wireless plans or home internet. Former Disney CEO Bob Iger said he was “very pleased” about the deal during last month’s earnings call.
Verizon and Disney+’s pact isn’t the first partnership between a telco and a streamer, although it is almost certainly the biggest. As the industry gets more crowded and competitive, these partnerships only stand to become more common. The reason is simple. As streamers look for ways to accelerate subscriber growth and as telco and tech companies look to claw customers away from competitors, joining forces gives both companies what they need, at least in the short term.
“You have these content companies who are going direct-to-consumer, and they often haven’t got the infrastructure to market and distribute themselves other than via their website or via an app in an app store,” said Frank Boulben, svp, consumer marketing and products, Verizon Wireless. “We are a very complementary distribution partner to them … and it coincides with the fact that they’re something our consumers want.”
Partnerships help reduce churn and keep brands competitive
Streaming services have partnered with telcos since at least 2017, when T-Mobile began offering free Netflix subscriptions to customers of its unlimited family plan. Sprint, now in the midst of merging with T-Mobile, gave its unlimited wireless customers an ad-supported Hulu subscription, also for no extra charge. And last fall, T-Mobile struck a deal with upcoming streaming service Quibi to give its 83 million customers access to the company’s programming upon its April debut. (The exact terms of that partnership haven’t been disclosed, and T-Mobile declined to comment.)
James McQuivey, vp, principal analyst, Forrester Research, said telcos pursue the deals to try to acquire customers who might be swayed by the promise of free access to a hot new subscription service.
“Telcos are always looking for anything that will make you switch, or make you stay after you did switch, but it is just so hard to do that in a market that is essentially undifferentiated,” McQuivey said.
Some telcos, like AT&T and Comcast, have their own built-in streamers they can leverage. WarnerMedia’s HBO Max and NBCUniversal’s Peacock will be folded in as benefits to their parent companies’ mobile and broadband packages. But even they may pursue deals similar to the Disney+ and Verizon partnership, which NBCU chairman Steve Burke called a “very attractive model” at a Peacock investor event in January.
For streamers that aren’t owned by a telco parent, partnerships offer up swaths of new customers. They also come with other benefits, like keeping churn in those streaming services low if promotions extend beyond a month at a time.
“Essentially Verizon says to Disney, we’re going to make sure the customer stays because we are going to keep them for a year,” McQuivey said. “And then when the year is up, we lock it into a monthly bill and hope they forget they’re paying for it.”
The partnerships come with initial costs. Boulben declined to provide specific breakdowns of its deal with Disney+, but said it’s typical for the content partner to fund part or all of the promotional efforts and compensate a service provider like Verizon for billing and customer service for special offers. That means a dent in the amount of revenue businesses can generate per user. And Verizon’s most recent earnings call reflected slightly lower than expected adjusted earnings.