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Verizon-Hearst JV to Buy Complex Media, Strengthen Business

Verizon Hearst Media Partners, a 50-50 joint venture between U.S. telecom behemoth Verizon Communications Inc. VZ and private media group Hearst Corp., has decided to acquire Complex Media Inc. to attract younger subscribers to their online businesses. The deal is expected to close within the next two months subject to regulatory approval. Although the financial terms of the deal are yet to be disclosed, The Wall Street Journal recently hinted that the deal size may go up to $250 million to $300 million.

Complex Media offers several online sites especially focusing on entertainment news, sneakers, hip hop music, food, fashion, sports and technology. The company now reaches more than 50 million monthly visitors garnering 300 million monthly views. Complex Media is profitable since 2010 primarily due to its unique feature of providing advertising facilities to targeted audience. Per the deal, Complex Media will develop premium video content to be distributed across Verizon’s digital platforms, including go90 and AOL.com.

Meanwhile, Verizon Hearst Media Partners will start two mobile channels this year - RatedRed.com, which will feature lifestyle content for U.S. millennial population and Seriously.TV, a comedy news network. Earlier this month, Verizon entered into a definitive agreement to acquire a 24.5% stake in AwesomenessTV for approximately $160 million. Once the transaction is completed, DreamWorks Animation SKG Inc. DWA will have a 51% stake in AwesomenessTV while Hearst Corp. and Verizon will hold 24.5% each. AwesomenessTV is a multiplatform media company that develops high quality content targeting at millennials.

To derive maximum benefits from its mobile video platform, Verizon took over AOL Inc. in Jun 2015. AOL provides advertising technology enabling automated buying and selling of ads online. In Oct 2015, Verizon also acquired Millennial Media, a leading company that sells mobile ads across numerous websites and applications. Its advertising platform is designed to monetize applications for publishers and developers through the use of data-driven ad targeting.

Verizon is currently focusing on online content delivery, mobile video and online advertising for future growth. These businesses have the potential to generate significant revenues for the company, especially given that its legacy telecom business is currently facing serious pricing competition.

Internet TV is gradually gaining market traction in the U.S. The legacy pay-TV industry is lately facing severe competition from online video streaming service providers. The low-cost over-the-top video streaming service has resulted in massive cord cutting that is currently threatening the pay-TV business model. Internet TV has emerged as a strong alternative to counter this competitive threat.

Apart from Verizon, DISH Network Corp. DISH and Comcast Corp. CMCSA have also launched their Internet TV services. AT&T Inc. T entered into a partnership with Chernin Group to offer similar services.

Verizon currently carries a Zacks Rank #4 (Sell).

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