Phoning It In

Verizon and AT&T became the top two wireless companies in the U.S. with promises of free rollover minutes and fewer dropped calls.

But as the business has matured — networks are now largely built out, and products and services are subject to downward price pressure — profits are getting squeezed. What’s a wireless giant seeking a return to explosive revenues to do?

Turn to the digitally disrupted TV-video market.

Both Verizon and AT&T are getting ready to launch over-the-top video services that will target younger — okay, millennial — audiences with collections of short-form, traditional and sports programming. These companies are banking that video services will separate them from upstart mobile competition.

For its part, AT&T recently paid about $49 billion to buy DirecTV, giving it access to programming assets that include the coveted NFL Sunday Ticket. AT&T has also plunged $500 million into the Chernin Group — that’s Rupert Murdoch’s former top lieutenant, Peter Chernin — all for the purpose of developing “snackable” video content.

Throw in niche shows, such as foreign melodramas and sports league programming, and AT&T has what its chief strategy officer, John Stankey, described to investors as the “legs of a stool.”

With AT&T’s huge wireless subscriber base, the audience is there. “This is a great opportunity to start building on that 100 million–handset mobile audience," Stankey noted.

Verizon hasn’t acquired a rival pay-TV operator to build its upcoming mobile service, but it’s been on quite a shopping spree.

In March it signed a deal with YouTube programmer AwesomenessTV, a subsidiary of DreamWorks Animation, to acquire 200 hours of original short-form programming. And in June Verizon agreed to license 45 Scripps Network shows, including Food Network’s Cutthroat Kitchen, HGTV’s House Hunters and Travel Channel’s Bizarre Foods.

On the sports front, Verizon already had an exclusive deal with the NFL to show games on mobile phones. But it added pacts with ESPN, CBS Sports, 120 Sports, ACC Digital Network and Campus Insiders.

To make the economics work, Verizon paid $4.4 billion to acquire AOL, a leader in advanced advertising technologies.

"The piece that we were missing was the ability to have an ad-tech platform to insert the advertising," Verizon Communications CFO Fran Shammo noted to investors.

At press time, neither wireless giant had announced a launch date for its new services, though both have promised a 2015 debut.