Verizon’s pumping big money into video service Go90 to beat the odds

Sources say Verizon has already spent at least $200 million on content that caters to young viewers. (One source put the figure at $500 million.) This includes licensing shows from TV networks and digital publishers, as well as commissioning original content from digital publishers like Vice, Defy Media, New Form Digital and Whistle Sports. (Verizon also now owns AOL, which is pumping out plenty of original content.) It’s a big reason why the company doesn’t Go90 to be profitable for at least two years.

“Verizon’s not making the mistake that other people have in this space by not investing enough in content,” said JC Cangilla, senior vp of business development at New Form Digital. “They’re taking their time, and we expect them to build an audience.”

Defy Media’s Smosh, which is one of the most-followed channels on the app, said it has 790,000 followers there. New Form Digital said that people are averaging eight minutes per user session for its 10-to 12-minute episodes of its first Go90 show. (The show stars YouTuber Joey Graceffa, who has 5.7 million subscribers on YouTube, which might account for its popularity.) Both publishers are producing more original content for Go90 in the coming year. Content providers are incentivized to drive people to Go90 as Verizon’s deal framework pays out based on how many viewers a channel or show gets on the app.

An informal survey of Go90 channels on the app shows that most don’t exceed 25,000 followers. Even with a huge install base of Verizon phones, Go90 faces the daunting task of building a consumer brand in a very crowded space.

“What’s to stop someone from still using their YouTube app? Nothing,” said Paul Verna, media analyst at eMarketer. “YouTube has built up a great deal of brand loyalty over the years. It’s a tall order for Go90 or anybody else.”

“If the content is ubiquitous or there’s a feeling that it’s available anywhere, they’ll have a hard time differentiating,” said Andy Tu, evp of marketing at Defy Media. “You have to look at the long game, though. They will eventually have something that pops and that you can only find there.”

Verizon’s existing distribution deal with the NFL means Go90 viewers — who are also Verizon customers — get to watch five NFL games per week on the app. Verizon also has deals the NBA and BeIn Sports, which will bring live weekly basketball and soccer games to Go90 starting next month.

“We’re on the five yard line in terms of where we’re going,” said Brian Angiolet, Verizon’s svp of consumer product portfolio. He added that Verizon plans to shares numbers on how Go90 is performing later this year. When it does, it’s banking on the combination of original content and live sports to move it a bit further.