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Wednesday, November 29, 2006

Business: YouTube on Verizon

Verizon officially announced a deal with YouTube today. See http://www.iht.com/articles/2006/11/28/business/youtube.php. As I understand it, the deal will enable Verizon Wireless customers to watch YouTube videos, they have preselected while browsing youtube.com, on their mobile phones. Sounds cool? Well, it is not! I think the news has generated more clicks than the new service will ever generate subscribers. Who do you think will pay $15/month to Verizon Wireless to get access to Vcast so that she/he can watch the videos she/he has already seen on Youtube? I would love to see the financial arangement of this deal. Most likely, this deal is more favorable for YouTube than for Verizon.

The strategic issue here is that the wireless companies in the US, most of which have wireline parents, don't want to "loose out" like they did with wireline broadband. In the current broadband world, the ISPs/wireline telecom companies are pipe providers and the content companies make the money and are considered more cool. Being monopolies for a while, the wirelines want to a piece of money Google/Yahoo are making "using their DSL/broadband pipes". They could not do it with wireline so they are trying to correct thier mistake with wireless broadband.

What do you think?