In the months leading up to the November debut of Disney+, Disney’s various entities weren’t the only ones helping to boost the OTT offering through major marketing and promotional pushes. The media and entertainment giant found a friend in Verizon, too.
A wide-ranging partnership between Disney and the telco, inked last summer, offered certain Verizon customers a free year of Disney+ if they subscribed to the company’s unlimited wireless plans or home internet. Former Disney CEO Bob Iger said he was “very pleased” about the deal during last month’s earnings call.
Verizon and Disney+’s pact isn’t the first partnership between a telco and a streamer, although it is almost certainly the biggest. As the industry gets more crowded and competitive, these partnerships only stand to become more common. The reason is simple. As streamers look for ways to accelerate subscriber growth and as telco and tech companies look to claw customers away from competitors, joining forces gives both companies what they need, at least in the short term.
“You have these content companies who are going direct-to-consumer, and they often haven’t got the infrastructure to market and distribute themselves other than via their website or via an app in an app store,” said Frank Boulben, svp, consumer marketing and products, Verizon Wireless. “We are a very complementary distribution partner to them … and it coincides with the fact that they’re something our consumers want.”
Partnerships help reduce churn and keep brands competitive
Streaming services have partnered with telcos since at least 2017, when T-Mobile began offering free Netflix subscriptions to customers of its unlimited family plan. Sprint, now in the midst of merging with T-Mobile, gave its unlimited wireless customers an ad-supported Hulu subscription, also for no extra charge. And last fall, T-Mobile struck a deal with upcoming streaming service Quibi to give its 83 million customers access to the company’s programming upon its April debut. (The exact terms of that partnership haven’t been disclosed, and T-Mobile declined to comment.)
James McQuivey, vp, principal analyst, Forrester Research, said telcos pursue the deals to try to acquire customers who might be swayed by the promise of free access to a hot new subscription service.
“Telcos are always looking for anything that will make you switch, or make you stay after you did switch, but it is just so hard to do that in a market that is essentially undifferentiated,” McQuivey said.
Some telcos, like AT&T and Comcast, have their own built-in streamers they can leverage. WarnerMedia’s HBO Max and NBCUniversal’s Peacock will be folded in as benefits to their parent companies’ mobile and broadband packages. But even they may pursue deals similar to the Disney+ and Verizon partnership, which NBCU chairman Steve Burke called a “very attractive model” at a Peacock investor event in January.
For streamers that aren’t owned by a telco parent, partnerships offer up swaths of new customers. They also come with other benefits, like keeping churn in those streaming services low if promotions extend beyond a month at a time.
“Essentially Verizon says to Disney, we’re going to make sure the customer stays because we are going to keep them for a year,” McQuivey said. “And then when the year is up, we lock it into a monthly bill and hope they forget they’re paying for it.”
The partnerships come with initial costs. Boulben declined to provide specific breakdowns of its deal with Disney+, but said it’s typical for the content partner to fund part or all of the promotional efforts and compensate a service provider like Verizon for billing and customer service for special offers. That means a dent in the amount of revenue businesses can generate per user. And Verizon’s most recent earnings call reflected slightly lower than expected adjusted earnings.
But it still helps move the needle for companies in a competitive market. Verizon relies on overall commercial performance as a barometer of whether a partnership is working, and Boulben pointed to the company’s most recent quarterly earnings—its fourth quarter was its best in six years, with Verizon netting 790,000 wireless subscribers—as evidence that Verizon was pleased with its results so far.
In a recent call with investors, Verizon Communications chairman and CEO Hans Vestberg labeled the deal a success. “Both of them have been a win-win for both our partners: for our customers and for Verizon,” Vestberg said on the call. “This is the strategy we want to have going forward.”
Partnerships equal cross-promotion
In addition to the scale a big company can offer a streamer, partnerships can sometimes provide an opportunity to double up marketing dollars for both parties’ benefit.
Disney and Verizon’s partnership included a wide-ranging marketing strategy aimed at leveraging both companies’ retail, television and digital properties. Disney+ promos got placement in Verizon’s 16,000 retail locations, while Verizon got to use Disney-owned clips from Guardians of the Galaxy and Toy Story in its TV spots. Some members of Verizon’s loyalty and rewards program VerizonUp got to screen the first three episodes of The Mandalorian to help build even more hype around the service’s debut.
“We developed a fully integrated marketing plan, which was quite unique,” Boulben said. “[Disney] provided us with their assets so that we could use them in our TV commercials, digital content, in the merchandising of the stores and in all of our digital marketing—so in our app, emails, newsletters, et cetera.”
Verizon will continue promoting its year of free Disney+ throughout the 2020 calendar year as part of a long-term marketing strategy, said Boulben. The company will also pursue other partnerships with other streaming video companies as it sees fit.
Tech companies also try the streaming partnership game
Other streamers have also looked for ways to combine marketing efforts, and they’re not just turning to telcos to do it. Netflix and Samsung, which have enjoyed cross-promotional opportunities over the years, made waves last fall with an ad for Samsung’s QLED television and the Netflix film 6 Underground with actor Ryan Reynolds’ Aviation Gin brand. Netflix CMO Jackie Lee-Joe told Adweek she was proud of those “fun” efforts.
Last month, the companies forged an even deeper partnership when Netflix said it would release bonus content from some of its shows on Galaxy smartphones. (That deal is not exclusive.)
Even small players are looking to leverage big tech platforms’ built-in audiences to launch their own services. The publisher Flipboard, which has also had a strategic partnership with Samsung, is pushing into streaming itself with Flipboard TV. And as part of its Samsung partnership, Samsung Galaxy S20s get three months of the video-on-demand service for free.
Flipboard’s partnership with Samsung “has always been a win-win,” said Claus Enevoldsen, vp, global growth and business development, Flipboard. The offering also helps extend the new service to a wide user base at the outset, helping the company learn and iterate as soon as it launches.
“It’s a good starting point for us because there’s a really good audience between what Flipboard has today and the type of audience that would buy a phone like the Galaxy,” Enevoldsen continued.
While partnerships and promotions help in the short term, McQuivey warned that they alone will not be enough for either party to find long-term success. These deals help companies build momentum, he said, but won’t help maintain it.
“At some point, everyone who wants access to those services will get them, so it’s not a meaningful churn preventer for services in the long run,” McQuivey said. “Eventually, to keep people coming back every month, you have to have the promise of an amazing catalog.”