News that some telco giants are seeking ways of getting out of TV and media is important news. In the US, Verizon has dumped once all powerful Yahoo into the hands of a private equity group, bundling AOL in with the deal. At its peak, advertising revenue for Yahoo hit $35 billion. The sale of 90% equity for both once leading-edge players was for just under $5 billion.
Yahoo Answers closed on May 4.
It is not just in the US where telco giants are trying to relieve their balance sheets of expensive media assets. In the UK, BT is looking for ways of unloading its BT Sport offering.
Clearly this does not mean that all telco giants (or any telco) will get rid of its media assets.
In fact, in some territories, success stories abound. PCCW, for instance, with its ‘OTT’ video service Viu, is going from strength to strength across large parts of the Asia Pac region.
In the US, the telco giants faced a situation where content wizards such as Disney, Apple and Amazon were in the game, with models and content ideas that were simply too swift and agile for AT&T (who took a $15 billion balance sheet hit for poor results from its purchase of Time Warner) and priced them out of the game.
There is also the old argument that telco giants simply do not ‘know’ anything except connectivity and a few value-added telco related services. It is clear that PCCW understood the challenges and went with an OTT approach which would not be comfortable for some telco giants we could mention.
Rakuten, often cited as the ‘perfect’ greenfield telco, is successful because it built a platform from the ground up. It did not need to try and transform a network into a platform, while continuing service.
The ETIS survey we reported on recently perhaps provides more clues to the issue. While only 5% of telcos said that connectivity was their only game, 3% said that media and TV services were offerings they would add on top. So, while they were not all getting out of media, it is not something that most telco giants feel is a natural fit.
What is a natural fit is either leading or supporting other ecosystems such as healthcare – providing a service enablement platform and supporting enterprises with private networks. A third of the respondents said they would provide a small set of extra supporting services, a third said a wide set.
Either way, telco giants seem to believe that the attractive and wind-swept world of TV and media is less attractive (and less profitable given the margins and competition) than other, more grown up sectors.
Unless telco giants understand the media world other sectors will bring greater opportunities.