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article imageVerizon may seek to battle Netflix with online service

By Leigh Goessl     Dec 8, 2011 in Business
As if Netflix wasn't plagued enough by a recent massive departure of customers and dipping stock, now it looks like the movie delivery services may have another battle on its hands with communications giant, Verizon.
According to Reuters, unnamed sources said Verizon Communications Inc. is planning to launch a new service that will stream television shows and movies over the Web, possibly as soon as 2012.
The targeted market would be geared towards consumers who live outside the regions that currently offer the popular broadband and TV FiOS package which currently services approximately five million households. Reuters said those outside the FiOS market are about 85 million households in the U.S. which could be the potential customer base.
Since no official announcement has been made, details are a bit sketchy due to the sensitive and secretive nature of negotiations. However people "with knowledge of the plans" say the package would be limited in scope, or might include a partnership with Walt Disney Co. or Viacom and add children's programming.
Last week Phillipe Dauman, Viacom CEO, said the company would be open to negotiations with other companies once their Epix contract with Neflix runs out in September 2012.
Verizon entering this market would not only put a crimp in Netflix's possible market base, but also could impact other cable companies in the long run if consumers turn to web-based movie and television streaming services as opposed to other more traditional pay-TV options. Cable companies have already been competing with satellite and telephone companies, such as Verizon's FiOS package, and having to remain afloat with web competition may be its unraveling.
Bloomberg's Business Week reported analyst Tony Wible, of Janney Montgomery Scott LLC, said if Verizon were to plunge into this market, it would be a "milestone" because it would the first time a cable or pay-TV provider geared at markets outside its "regional footprint."
“We see this as a catalyst” for other companies, Wible said in a research note yesterday, reported Business Week.
What this could mean is other regional cable companies and pay-TV providers could jump into the market as well, increasing competition.
PC Magazine reported, "Verizon may have tipped its streaming direction by recently rolling out a FiOS app for Xbox Live. The offering will allow subscribers to watch live TV and on-demand video via the Xbox 360, starting this holiday season. However, it is only available to existing Verizon subscribers."
Reportedly Verizon has declined to comment on any news or speculation about this possible deal.
Verizon Chief Executive Officer Lowell McAdam said at a UBS AG conference in New York, “We’ll continue to look at different alternatives, but I think there will be a place for over-the-top” video. The company may combine streaming video with other forms of distribution, with the model “yet to be determined,” he said.
Last month Digital Journal reported Netflix announced they did not expect to be profitable in 2012. On Tuesday Netflix stock fell again, bringing the total to a 59 percent decline this year.
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