Verizon Communications Inc. (NYSE:VZ) recently announced that it will be making an addition to its family of cable-related services.
No longer will Verizon only offer the pre-packaged bundles — which cost upwards of $100 and include hundreds of channels that the majority of people don’t watch — that many people are longer interested in.
Now, Verizon will offer an “a la carte” service, in which subscribers will be able to handpick the channels they want included in their cable packages. Well, kind of …
Let’s take a look at the specifics of the new service for FiOS TV consumers.
For a base payment of $54.99, subscribers will receive 35 base network channels and two additional channel packs of their choice. There are seven different channel pack options, each based on different television genres such as sports, children’s shows, news and entertainment. Any additional channel packs cost $10 apiece.
Here’s the catch, though. This a-la-carte type of package is only a cable package — there is no Internet or phone service included.
With Verizon’s announcement, it’s finally clear that cable companies are trying to listen to their customers, and those customers have made it very clear that it’s all about being able to watch what you want to watch, when you want to watch it.
Cable and streaming companies have been at war lately, and I believe it’s quite obvious that the streaming companies are winning — the battle, at least. You can see this in the charts. Since breaking out around $40 back in April of 2013, Verizon has climbed about 20% in a two-year period.
In that exact same time frame, Netflix, Inc. (NASDAQ:NFLX) is up an unbelievable 165%! While NFLX stock’s chart is now the true definition of parabolic given its recent run, VZ stock’s chart is the true definition of mundane.
Now that Verizon is making an effort to reel back in those customers that are headed for the door, the question to ask is will this be enough to stem the tide for VZ stock?
I don’t think so. Let’s talk about why.
To be honest, I yawned when I saw Verizon’s announcement. Don’t get me wrong, this is certainly a step in the right direction, but I’m here to make you money and I do not see how this is going to really move the stock the way we want it to.
Verizon made this plan because its customers are asking for a new and improved version of cable. They don’t want to pay for all of those channels they simply don’t watch. However, Verizon’s “a la carte” service has a minimum cost of $54.99, and as soon as you start adding in the taxes, fees and (at the very least) an Internet package, you’re right back up above $100.
So, rather than paying too much for channels they don’t watch, subscribers will now be paying relatively the same amount of money for a fewer number of channels.
In my opinion, Verizon has been too slow and too plotting over the years, which is why VZ stock’s chart has been so mundane. If Verizon had come up with a new service that truly allowed customers to handpick the channels they do and don’t want to watch, that could have been a game changer.
People clearly no longer want pre-packaged bundles, and while VZ’s new service is definitely on the right path, I simply do not believe it’s the move we’ve been waiting for. At this point in time, streaming is definitely winning, and Verizon will need to do more.
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