Report: Successful Broadband Alliances Depend On Content, Service
The report, entitled "Broadband Provider's Content Partnership Strategies Have Risks and Rewards," claims that developing sound content strategies will be crucial for these companies as broadband adoption enters a new phase beyond the requisites of availability, price, and access speed. Applications and content mark this second phase, with SBC and Yahoo leading the way, according to the report.
The SBC-Yahoo union is an example of the "right" way to marry content to service, the report says, as both companies have created a strong co-branded offering while furthering their own respective brand equity through the partnership. SBC landed 446,000 new subscribers in First Quarter 2004, while Yahoo took in 88 million through the partnership. While this accounts for less than 5 percent of Yahoo!'s overall revenue, it marks a 39 percent subscription hike over the fourth 1uarter 2003. SBC and Yahoo are bound to each other by shared revenues and expenditures.
Noting that Yahoo recently rolled out a similar product with British Telecom DSL and signed a contract with Rogers Cable in Canada, the Yankee report says it is "obvious" that Yahoo! likes the model.
While the Yahoo-SBC deal closely links the two companies, other broadband content and service partnerships are "less committed," although "the less committed path is not necessarily a bad strategy."
MSN's deals with DSL providers Qwest and Verizon are less integrated than the SBC-Yahoo partnership, and "are very much the path of least resistance for both content and access provider," the report says. Qwest's relationship with MSN has dissolved somewhat from an integrated offering to a cross-marketing deal because of internal problems. Verizon, on the other hand, is taking the offensive by launching "a heated advertising campaign directly targeting its cable competitors," while emphasizing MSN's security and content features, with "little back-end development" between the two companies.
The report notes that while telecommunications companies are looking to boost subscriptions through partnerships with recognized content providers, Time Warner Cable's principal broadband offering Roadrunner currently brings content in and deploys it under its own brand name. Roadrunner is one of three broadband cable offerings by Time Warner Cable; it also has partnerships with EarthLink and Time Warner subsidiary America Online.
The cross-brand promotions and partnerships between DSL providers and content publishers could spell problems for DSL companies, the Yankee Group says. "Potentially, consumers will stop seeing a connection between Verizon and its broadband service. Verizon has put itself in the unflattering position of merely being the access provider for a service that is access agnostic," the report says.
On the other hand, broadband cable providers need to ensure that they match the features and services available to DSL subscribers. Quarterly growth for DSL, the report notes, has been "through the roof." This is due to price reductions and the availability of content.