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Verizon Acquires Vessel, Will Shut Down Jason Kilar’s Video Service

Verizon Communications has acquired Vessel, the internet video startup co-founded by former Hulu CEO Jason Kilar. The telco is shuttering the Vessel service effective Oct. 31 and plans to deploy its technology in the Go90 platform.

Terms of the deal weren’t disclosed. Kilar will not be joining Verizon, while Vessel CTO and co-founder Richard Tom (who was previously Hulu’s chief technology officer) and most other employees will be making the move to the Go90 team.

Founded in 2013, Vessel raised more than $134 million to date from investors including Amazon founder and CEO Jeff Bezos’ Bezos Expeditions, IVP, Greylock Partners and Benchmark.

Verizon said the deal to acquire the technology and software that powers Vessel’s online-video subscription service would accelerate its over-the-top strategy with Go90. Chip Canter, GM of Verizon Entertainment, said Vessel was a “smart pairing” with its strengths in content discovery and recommendations, user experience, and OTT subscription management.

“With Richard Tom leading technology and operations and Lonn Lee heading up product, we have the utmost confidence in our ability together to rapidly execute and enhance our products,” Canter said in announcing the deal.

Vessel said its subscription VOD service will be terminated Oct. 31. The startup said subscribers of the monthly $2.99 plan will not be charged for the month of October, while subscribers of the $19.99 annual plan will be refunded back to the beginning of the month based on their signup date (although those who subscribed to Vessel through iTunes must contact Apple customer support for a refund).

Verizon has been investing in a number of digital-video initiatives, looking to build what it envisions as a next-generation TV service for mobile-focused consumers. In 2014, the telco paid about $200 million for Intel’s OnCue over-the-top video division, which never commercially launched its internet TV subscription service. The OnCue technology formed the basis for the Go90 service.

Last year Verizon bought AOL for $4.4 billion and reached a deal to acquire Yahoo’s core internet businesses (although the telco is evaluating the impact of the massive Yahoo hack on the terms of the deal). And Verizon earlier this year formed a 50-50 digital-video joint venture with Hearst, and the partners subsequently bought youth-oriented digital media player Complex. Verizon also owns a 24.5% stake in AwesomenessTV, majority owned by Comcast with Hearst holding the remaining equity.

Vessel’s original business plan was to sell $2.99 monthly subscriptions to get early access to content from top creators on YouTube and other platforms, while allowing free, ad-supported access to other users. The model — which prompted anxiety among YouTube’s executive ranks a few years ago — didn’t pan out the way Kilar and Vessel’s backers had hoped, and near the end the startup had been terminating content deals with certain partners.

San Francisco-based Vessel never disclosed how many subscribers or users it had managed to attract. But Kilar had claimed that the exclusive-windowing strategy combined with subscriptions made the service 10 times more profitable for creators than YouTube.

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