Verizon's Internet TV Service May Let Brands Sponsor Your Binge-Watching

Service Scheduled to Launch This Summer in the U.S.

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Credit: Bloomberg

Verizon appears poised to let brands sponsor your TV watching.

Sometime this summer Verizon will launch in the U.S. an ad-supported TV service delivered via the internet. The service will feature live and on-demand programming as well as programming from digital video networks like AwesomenessTV, Verizon Exec VP-President of Product Innovation and New Business Marnie Walden said during a conference call Tuesday morning to announce the close of its AOL acquisition.

She referred to the service -- whose underlying technology Verizon acquired from Intel -- as a "mobile-first video product."

Internet-delivered TV sounds like a great idea. Streaming video over the internet instead of through a cable box means that people can watch TV on any device they want wherever they are. But all of that content comes with the cost of piping that data -- and video packs more data than any other type of content -- to people's devices.

Verizon could assume the cost of that data, which would weigh down its profits. It could pass on the data costs to its customers by charging them for the amount of data that they use similar to the way it sells wireless data plans, which would aggravate its customers. Or it could ask the programmers like AwesomenessTV to pay for the data people use to watch their content, which would run afoul of the FCC's net neutrality rules.

Verizon has come up with another option. The company will let advertisers pick up the bill. "Ad-sponsored data is part of the product offering," said Ms. Walden of Verizon's upcoming internet TV service. She added that there would also be "premium offerings" but did not specify whether that means people would be able to pay for an ad-free version of the service.

Ms. Walden didn't detail how Verizon's sponsored data program would work, but its biggest rival AT&T already operates a sponsored data program that could offer a peek into Verizon's plans. In January 2014 AT&T announced that brands would be able to pay AT&T to cover the costs of streaming data for particular sites or apps to AT&T's wireless customers. The customers get to check out those sites or apps without adding to their wireless bills, marketers get to put their brand in front of those people and AT&T gets to protect its profits.

Asked whether letting brands sponsor the service's data would violate the FCC's net neutrality rules -- which prohibit a company like Verizon from letting someone pay to prioritize the delivery of specific content over other content -- Ms. Walden said, "we believe we are well within the ability to do that." The FCC's net neutrality rules appear to permit the kind of sponsored data program that AT&T runs and Verizon is preparing to run.

While Verizon operates its own internet and wireless services that people could use to stream its upcoming internet TV service, the service will also work over its competitors' internet and wireless services. However some features will only work when streamed through Verizon's pipes, such as "multicast for live delivery," Ms. Walden said. That appears to mean the ability for one customer to stream live programming from the internet TV service across multiple devices at the same time.

Sponsoring people's TV watching won't be the only way for brands to advertise on Verizon's internet TV service. The service will also carry ads sourced from AOL, which sells ads directly and also operates a suite of ad-tech tools to automate ad sales through real-time auctions.

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