Verizon Communications added just 20,000 FiOS TV customers in the fourth quarter, its weakest additions since launching the service in 2006, and further evidence that cord-cutting is beginning to chip away at what once was pay TV’s most reliable growth engine.
FiOS TV ended the fourth quarter with 5.8 million customers. Broadband growth also slowed in the period, as Verizon added 99,000 FiOS Internet customers, compared to 145,000 additions in the same period last year.
Leichtman Research Group president and principal analyst Bruce Leichtman said the 20,000 FiOS TV additions were the lowest since the second quarter of 2015 when the unit added 26,000 video customers. He added the results are a factor of Verizon’s own success – it has about 35% video penetration in its markets, leaving little room for growth – and its recent deal with Frontier Communications to sell about 1 million subscribers for $10.5 billion.
“They are de-emphasizing the penetration of video and looking more at profitability,” Leichtman said. “They have made that pretty clear.”
On a conference call with analysts, Verizon chief financial officer Fran Shammo said the company, which launched its mobile video product go90 in September, is seeing a decline in demand for its linear TV product, adding that more and more new customers are coming in on a broadband-only basis. As far as the existing base, he said most customers are keeping video and broadband and if they drop a product it is usually voice.
Shammo also hinted that Verizon’s battle with ESPN over its Custom TV skinny bundle may be heading toward resolution. While he would not directly address the ESPN dispute – the network sued the company for violating its carriage agreement by not including it in the Custom TV bundle – he said the company expects in the short term to be in “compliance with the contractual arrangements that we need to be in compliance with.”
Shammo added that Custom TV continues to be popular with customers, with about one-third of new subscribers choosing the skinny bundle.