Verizon Buys AwesomenessTV Stake, to Start Pay Go90 Service

  • Subscription-based offering is part of mobile-video push
  • DreamWorks cashing in on wireless companies' new strategies

Verizon Communications Inc. acquired a 24.5 percent stake in digital entertainment network AwesomenessTV from DreamWorks Animation SKG Inc. and will start a subscription-based mobile video service as part of its go90 streaming offering.

Verizon, which had been exploring the introduction of a go90 pay service for the past few months, will allow customers to buy individual shows or full series on demand. The company also plans to make the go90 app available on laptops and desktop computers, said Brian Angiolet, Verizon’s senior vice president of consumer products.

The nation’s largest wireless carrier is shifting from partner to stakeholder in AwesomenessTV, furthering its foray into entertainment programming. The deal values AwesomenessTV at $650 million, according to a statement Wednesday. DreamWorks will remain the majority owner with a 51 percent stake. Hearst Corp. owns the remainder of the video producer.

Verizon has been expanding its entertainment offerings to lure more subscribers and draw advertisers through its AOL unit. Last year the mobile-phone company introduced go90 as a free mobile-video service with content aimed at teens and millennials. Verizon already had programming deals with AwesomenessTV and DreamWorks for scripted and unscripted shows and a joint venture with Hearst to create two video channels for mobile viewing.

Big-Name Talent

The quality of shows in the new subscription service will be higher than what is now available on go90, said Brian Robbins, chief executive officer of AwesomenessTV and the producer of TV shows like “One Tree Hill” and “Smallville.” The company is talking to “big-name talent, in front of and behind the camera” to make quality programming that rivals those on HBO and Showtime, he said.

AwesomenessTV shows now include “Royal Crush,” a web series created with Royal Caribbean Cruises Ltd., and high-school comedies like “Foursome.”

The growth in online video consumption has been good for DreamWorks’ investment in AwesomenessTV in 2013, when it agreed to pay $33 million in cash and as much as $117 million more if earnings targets were met. When Hearst acquired its stake in the video producer in December 2014, the company was valued at $325 million.

Given the rising value and a potential doubling of annual revenue through the deal, AwesomenessTV could provide Verizon, DreamWorks and Hearst an IPO opportunity, Amy Yong, an analyst at Macquarie Capital USA Inc. wrote in a note Wednesday.

Data-Hungry Millennials

Verizon and AT&T Inc., the No. 2 U.S. wireless carrier, are trying to expand beyond phone service by tapping a mobile-data hungry millennial audience that doesn’t necessarily buy big-bundle cable-TV subscriptions. They’re also looking to capitalize on advertising plans for new shows and stars as they emerge on popular YouTube channels.

“Verizon will continue to make incremental strategic moves to strengthen their mobile first video strategy until that initiative has found its place in the market and works financially,” said Kevin Roe, an analyst at Roe Equity Research LLC.

Dallas-based AT&T, through its Otter Media joint venture with the Chernin Group, is sponsoring the start of a $4.99-a-month subscription online-video service run by Fullscreen Inc., which offers shows aimed at young people from teens to 30-year-olds. AT&T also recently acquired “Equals,” a movie starring Kristen Stewart, which will premier at the Tribeca Film Festival later this month.

“The carriers’ primary role is to bring their large balance sheets to bear and leverage their massive distribution and mobile customer relationships,” Roe said.

(An earlier version corrected the spelling of AwesomenessTV in one reference.)

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