$250m/year Yahoo, AT&T Deal Burst: Yahoo Threatened
According to a story on Wall Street Journal, the deal between Yahoo! and AT&T worth $250mn/year is at stake. Clearly, Yahoo! is not in a shape to accept such a major loss of revenue and might dip below red. In fact, the company has already suffered 5% of its market capitalization due to the reports of “renegotiations.”
As per the deal, Yahoo! provides its services to AT&T subscribers and is paid for every monthly subscriber. There is an excerpt of the news post at Techcrunch:
AT&T now wants to overhaul its Yahoo deal, according to a person familiar with the issue. Instead of paying Yahoo a percent of the revenue from its broadband business, AT&T wants to offer Yahoo only a cut of revenue from the sale of products Yahoo provides, such as from its music and photo services, this person says.
One reason AT&T now believes it shouldn’t have to share broadband subscription revenue is that the phone company has been approached by other Internet companies offering to pay to reach its broadband customers, says the person. Google over the past year has played a high-profile role in paying companies that help expand its online services and advertising. Those offers, bankrolled by Google’s Internet ad success, have roiled the market for deals structured like Yahoo and AT&T’s — as Google pays partners rather than charges them.
If Yahoo! loses the deal it will be serious bad news for them. Despite Panama, Yahoo! can’t pull off that kind of revenue from elsewhere in near future. In fact, the bigger concern would be that AT&T might not be the last one to pull the plug on Yahoo! If a mass migration to Google (in that case, MSN too) begins, the second biggest search company could turn turtle. As GigaOM conjectures:
Of course there is the other option – AT&T buying Yahoo! Stranger things have happened!