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How T-Mobile wants to use Quibi to keep its most valuable customers

Carriers shift from building their own media services to bundling as a way to reduce churn.

Mike Sievert, president and chief operating officer for T-Mobile speaks as Meg Whitman, chief executive officer of Quibi

T-Mobile will offer customers who pay for two lines or more free access to Quibi. It's T-Mobile's latest bundled perk in an effort to upsell and retain customers.

Photo: Denise Truscello/Getty Images

Quibi is about to launch with a massive T-Mobile partnership — but the carrier's Quibi promotion won't be a free for all. Instead, T-Mobile is specifically targeting some of its most valuable customers.

The telco is about to roll out a promotional partnership with Quibi, the mobile video service helmed by former HP CEO Meg Whitman and Hollywood mogul Jeffrey Katzenberg, early next month. However, Quibi won't be free to T-Mobile's entire customer base. Instead, it will be exclusive to subscribers who pay for two or more lines of postpaid service, Protocol has learned. T-Mobile's partnership with Quibi was first revealed last October, but eligibility details have yet to be officially announced. (Spokespeople for both companies declined to comment.)


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The carrier's Quibi promotion in many ways mirrors its partnership with Netflix, whose service it gives away to subscribers who pay for two or more lines. It's also indicative of an industry-wide trend. Instead of spending hundreds of millions of dollars on developing their own services, carriers increasingly team up with third-party streaming services to gain and retain subscribers in an increasingly competitive market.

A 20% bump for Disney+

Quibi is set to launch on April 6 with two plans: The service, which focuses on episodic content in 6- to 10-minute increments, will be available with preroll ads for $4.99 per month, or ad-free for $7.99. T-Mobile will give away ad-supported Quibi subscriptions to customers who are signed up for two or more lines of its most popular postpaid plans, including its line of Magenta and T-Mobile One plans, according to documents reviewed by Protocol. It's worth noting that the company may tweak parts of the deal or add additional terms and conditions ahead of its launch.

Eligible customers will have to sign up through the T-Mobile app, and will only be able to watch Quibi on one screen at a time. The company is set to officially announce the terms of this promotion in the coming weeks and is expected to continue to offer free Netflix plans to eligible subscribers as well.

T-Mobile isn't the only carrier teaming up with media services. Verizon became the launch partner of Disney+ last November, allowing all of its Unlimited subscribers to sign up for a free year of the service. That partnership has been a success for both sides: Former Disney CEO Bob Iger revealed in February that around 20% of the 26.5 million Disney+ subscribers had signed up via the carrier. Verizon, for its part, reported a 21% year-over-year growth in Q4 subscriber additions as a result of the promotion.

There are some significant differences between the two promotional partnerships, however. Verizon went wide, giving almost all of its postpaid subscribers access to Disney's service, while limiting access to 12 months. The latter inevitably resulted in outgoing T-Mobile CEO John Legere insulting Verizon on one of his company's earnings calls, claiming that Verizon's "vice president of copy and paste" had done a "terrible job" at re-creating T-Mobile's Netflix offer.

Wholesale rates, postpaid churn

Carriers and media services tend to keep financial details about their deals tightly under wraps, but past remarks from Netflix executives suggest that T-Mobile tends to pay industry-standard wholesale rates for these types of bundles. Back-of-the-envelope math would suggest that T-Mobile is paying roughly $4 per month, or close to $50 per year, per subscriber who signs up for Quibi.

The benefits of customers signing up for another line likely more than outweigh those costs. And while Quibi alone may not get too many customers to switch their family members to a new mobile carrier, it does add to the overall stickiness of the customer relationship. Plus, T-Mobile executives have said in the past that they are looking to add more media services.

Carriers have long spent $300 or more per subscriber on customer acquisition — money that the companies slowly earn back over time, making every month that a customer doesn't switch to a new provider more valuable than the previous one. Reducing churn is key to profitability for carriers, and streaming services are just the latest add-on in an industry known for heavily subsidizing phones, or giving away iPad Minis, to subscribers who commit to long-term contracts.

A lot less risky for carriers

The costs of this bundling strategy are significantly lower than any attempt to build its own media service to both retain subscribers and grow ad dollars, as Verizon learned the hard way with Go90. The failed mobile video service cost Verizon hundreds of millions of dollars without ever attracting a significant audience. "This is precisely why T-Mobile prefers to partner, rather than build, as the carrier takes on little financial commitment and essentially no performance risk," remarked Cowen Research's team of media analysts in a streaming-media report late last year.


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While bundled media services can represent an upside for telcos, it's still unclear what the long-term impact on media services will look like. Quibi will benefit from the additional marketing it gets from T-Mobile, and Verizon's success with Disney+ suggests that there is also the potential for significant revenue and subscriber growth, but Netflix executives have long cautioned investors to expect too much of a bump from bundled deals. Netflix's chief product officer recently told investors that bundles were still "a relatively small fraction" of the streamer's total customer acquisition.

Then-CFO David Wells was even more blunt in April 2018, five months after the company first teamed up with T-Mobile. Asked about the impact of these bundles, Wells said: "They're very immaterial today."

Protocol | Fintech

Jack Dorsey is so money: What Tidal and banking do for Square

Teaming up with Jay-Z's music streaming service may seem like a move done for flash, but it's ultimately all about the money (and Cash).

Jay-Z performs at the Tidal-X concert at the Barclays Center in Brooklyn in 2017.

Photo: Theo Wargo/Getty Images

It was a big week for Jack Dorsey, who started by turning heads in Wall Street, and then went Hollywood with an unexpected music-streaming deal.

Dorsey's payments company, Square, announced Monday that it now has an actual bank, Square Financial Services, which just got a charter approved. On Thursday, Dorsey announced Square was taking a majority stake in Tidal, the music-streaming service backed by Jay-Z, for $297 million.

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Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

Sponsored Content

The future of computing at the edge: an interview with Intel’s Tom Lantzsch

An interview with Tom Lantzsch, SVP and GM, Internet of Things Group at Intel

An interview with Tom Lantzsch

Senior Vice President and General Manager of the Internet of Things Group (IoT) at Intel Corporation

Edge computing had been on the rise in the last 18 months – and accelerated amid the need for new applications to solve challenges created by the Covid-19 pandemic. Tom Lantzsch, Senior Vice President and General Manager of the Internet of Things Group (IoT) at Intel Corp., thinks there are more innovations to come – and wants technology leaders to think equally about data and the algorithms as critical differentiators.

In his role at Intel, Lantzsch leads the worldwide group of solutions architects across IoT market segments, including retail, banking, hospitality, education, industrial, transportation, smart cities and healthcare. And he's seen first-hand how artificial intelligence run at the edge can have a big impact on customers' success.

Protocol sat down with Lantzsch to talk about the challenges faced by companies seeking to move from the cloud to the edge; some of the surprising ways that Intel has found to help customers and the next big breakthrough in this space.

What are the biggest trends you are seeing with edge computing and IoT?

A few years ago, there was a notion that the edge was going to be a simplistic model, where we were going to have everything connected up into the cloud and all the compute was going to happen in the cloud. At Intel, we had a bit of a contrarian view. We thought much of the interesting compute was going to happen closer to where data was created. And we believed, at that time, that camera technology was going to be the driving force – that just the sheer amount of content that was created would be overwhelming to ship to the cloud – so we'd have to do compute at the edge. A few years later – that hypothesis is in action and we're seeing edge compute happen in a big way.

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Saul Hudson
Saul Hudson has a deep knowledge of creating brand voice identity, especially in understanding and targeting messages in cutting-edge technologies. He enjoys commissioning, editing, writing, and business development, in helping companies to build passionate audiences and accelerate their growth. Hudson has reported from more than 30 countries, from war zones to boardrooms to presidential palaces. He has led multinational, multi-lingual teams and managed operations for hundreds of journalists. Hudson is a Managing Partner at Angle42, a strategic communications consultancy.
Power

Viewers like you: How PBS is adapting to the streaming age

The public broadcaster has had considerable success on YouTube and other digital platforms. Now, it is looking to revamp pledging.

PBS has begun to talk to ad-supported video services, including some that distribute programming via free 24/7 channels, to help it compete in the streaming age.

Image: PBS

If there were a playbook for the streaming wars, it might read something like this: Take your most valuable assets, slap a plus behind your most recognizable brand name, and start counting the money.

For PBS, things aren't quite that easy. While the public broadcaster has made some inroads in streaming, it has been slower to embrace digital business models than some of its commercial competitors. But that could change in the coming months. PBS is in discussions to bring its app to additional platforms, including a new crop of ad-supported video services, and has plans to turn smart TVs into donation machines that could ultimately make the old-fashioned pledge drive obsolete.

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Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Transforming 2021

Blockchain, QR codes and your phone: the race to build vaccine passports

Digital verification systems could give people the freedom to work and travel. Here's how they could actually happen.

One day, you might not need to carry that physical passport around, either.

Photo: CommonPass

There will come a time, hopefully in the near future, when you'll feel comfortable getting on a plane again. You might even stop at the lounge at the airport, head to the regional office when you land and maybe even see a concert that evening. This seemingly distant reality will depend upon vaccine rollouts continuing on schedule, an open-sourced digital verification system and, amazingly, the blockchain.

Several countries around the world have begun to prepare for what comes after vaccinations. Swaths of the population will be vaccinated before others, but that hasn't stopped industries decimated by the pandemic from pioneering ways to get some people back to work and play. One of the most promising efforts is the idea of a "vaccine passport," which would allow individuals to show proof that they've been vaccinated against COVID-19 in a way that could be verified by businesses to allow them to travel, work or relax in public without a great fear of spreading the virus.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

People

How Chess.com built a streaming empire

Twitch users watched 18.3 million hours of chess content in January, nearly as much as they consumed throughout 2019. Last week, chess even surpassed League of Legends, Fortnite and Valorant as the most-watched gaming category.

To date, Chess.com has over 57 million members.

Photo: William West/Getty Images

There's something inherently perverse in calling chess "open source." It's a bit like saying France "pivoted" from monarchy to republic, or that indoor plumbing was a "10x idea."

Nevertheless, it's true: Anyone has free rein to make a chess game.

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Hirsh Chitkara
Hirsh Chitkara (@ChitkaraHirsh) is a researcher at Protocol, based out of New York City. Before joining Protocol, he worked for Business Insider Intelligence, where he wrote about Big Tech, telecoms, workplace privacy, smart cities, and geopolitics. He also worked on the Strategy & Analytics team at the Cleveland Indians.
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