Morningstar

Verizon's Video Play in AOL Deal No Sure Thing

We remain skeptical of Verizon's potential in video as established players, like Google, and new firms attack the market.

Securities In This Article
Verizon Communications Inc
(VZ)
Alphabet Inc Class C
(GOOG)

Although the planned $4.4 billion acquisition of AOL AOL opens

Verizon's new mobile video offering won't replicate the traditional television experience, but instead will feature a mix of live (primarily sports and cultural events) and on-demand programming designed to appeal to younger viewers. Verizon has said previously that it sees three paths to monetizing this offering: subscriptions, increased data consumption, and advertising. Adding AOL's ad platforms will expand Verizon's ability to capitalize on the advertising opportunity, providing its content partners with the ability to maximize the value of ad inventory available on the new service.

Verizon may be able to uniquely combine its customer knowledge with other sources of information to create highly targeted ads for marketers. However, other competitors in the mobile video and advertising industry potentially have the advantage of greater reach, for both consumers and advertisers, should Verizon favor the content available via its own service. The perception of such favoritism could also harm Verizon's market position.

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About the Author

Michael Hodel, CFA

Sector Director
More from Author

Michael Hodel, CFA, is a sector director, AM Communication Services, for Morningstar*. He covers U.S. telecom service providers and related firms, including AT&T, Verizon, and Comcast. His team covers media companies, global telecom service providers, and owners of telecom infrastructure, such as wireless towers and data centers. The team’s research focuses on the role that evolving networking technologies, consumer habits, and industry structures play in shaping the competitive advantages and disadvantages facing firms under coverage.

Hodel joined Morningstar in 1998, initially serving within the equity data group, responsible for collecting financial information on thousands of firms. Prior to his current position, he spent two years as a portfolio manager for Morningstar Investment Management, LLC. Previously, he served as a technology strategist responsible for telecom research, chair of Morningstar’s Economic Moat Committee, and a senior member of Morningstar’s corporate credit ratings initiative.

Hodel holds a bachelor’s degree in finance, with highest honors, from the University of Illinois at Urbana-Champaign. He also holds a master’s degree in business administration from the University of Chicago Booth School of Business. He also holds the Chartered Financial Analyst® designation.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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