A key reason investors have been bearish on Verizon (VZ 1.17%) is because of its disappointing growth rate. And in an inflationary environment that drives up costs, it's a hard place to be in. But Verizon doesn't seem to be out of ideas on how to grow its business. It should soon unveil its latest plan to stimulate growth -- a streaming services partnership with Netflix and Warner Bros. Discovery.
Verizon to offer a bundled streaming plan
Cutting the cord was supposed to be a way for consumers to cut down on their cable bills. But with so many streaming services available today and content not always available on the same platform, it can lead to a frustrating situation for consumers. The end result is that many consumers end up having to subscribe to multiple services, making streaming no longer as attractive as the early days of Netflix when it was a hub of content from many other producers.
However, Verizon could soon be making things easier for consumers. According to the Wall Street Journal, Verizon has partnered with Netflix and Warner Bros. to offer a streaming bundle that features ad-supported tiers of both Netflix and Max. It will cost just $10 per month, which is less than if consumers purchased both subscriptions separately, where they would cost $17.
As prices rise for streaming services, Verizon could attract many price-conscious consumers by bundling two popular options together.
The telecom provider can benefit in multiple ways
The specifics of the deal haven't been released yet, but there are a couple of big wins for Verizon here.
The first is that it can lower its churn rate and potentially attract more customers. Any sort of incentive it can give people to use its service over one of its rivals can be a big win for Verizon. In recent quarters, the company has struggled to generate positive year-over-year growth. A deal that helps consumers save money on subscriptions could help improve its growth rate. According to the report, the bundle will be available to customers on Verizon's "myPlan" wireless service.
VZ Revenue (Quarterly YoY Growth) data by YCharts.
Verizon is also going to share in the revenue from this deal with Netflix and Warner Bros. The details aren't available, so it's too early to tell how much of an impact this could be for Verizon, but that can also be a potential catalyst for the company's top line.
While many consumers aren't thrilled about streaming packages that include ads, the price point is clearly appealing to many. Netflix's ad-supported plan now accounts for 30% of new sign-ups in the U.S., while for Max that percentage is 19%.
This deal might not lead to huge revenue growth for Verizon, but it's definitely something worth watching as Netflix and Warner Bros. both generate more than $30 billion in annual revenue. Even getting a small slice of that could help improve the telecom company's growth rate. Last year, Verizon reported just under $137 billion in sales.
Why Verizon could be the big winner here
This deal makes sense for all three parties. These companies can all boost their subscriber numbers by offering a more cost-effective streaming option for consumers. But in Verizon's case, it can also lead to more upselling opportunities to bundle other services for customers. Plus, by sharing in the revenue from the deal, an additional revenue stream opens up to help pad its top line.
Verizon has also been the worst-performing stock of the three listed here (it's down 7% while Warner Bros. has risen 14% and Netflix is up 61%), and so getting some positivity around the stock and its growth rate could lead to more of a boost for Verizon than the other stocks.
Trading at only seven times profits, Verizon still looks like a steal of a deal, especially given that it also pays a dividend yielding 7.3%.
