Verizon Slims Down Cable Packages, Provoking Lawsuit

Photo (cc) by AngryJulieMonday

Consumers might like the freedom to choose which channels they want included in Verizon’s new slimmed-down cable programming bundle, but ESPN isn’t happy about it.

The sports network claims in a lawsuit that Verizon’s new custom cable plan is a breach of contract, USA Today reports.

Verizon’s cable package allows FiOS customers to purchase a $55 base package and then choose two additional smaller bundles of channels to bolt on to their package.

ESPN, ESPN2 and ESPNU are included with several other networks in Verizon’s add-on sports package, while ESPNews is incorporated in the sports plus package offering. The other “skinny bundles” are more geared to pop culture or children’s programming, Bloomberg reports.

The sports network contends that its contract stipulates that its channels cannot be distributed in a separate sports package, according to The Verge. Verizon maintains that it is simply giving consumers what they want — a custom cable package that includes only the channels they watch.

“ESPN is at the forefront of embracing innovative ways to deliver high-quality content and value to consumers on multiple platforms, but that must be done in compliance with our agreements,” ESPN spokeswoman Katina Arnold said in a statement. “We simply ask that Verizon abide by the terms of our contracts.”

ESPN, which is owned by Disney, was quick to criticize Verizon’s custom cable plan, but Fox and NBCUniversal also voiced complaints, USA Today said.

“The issue here is that Verizon made unilateral decisions on how to offer ABC Family, Disney Channels, ESPN and ESPN2 that are in violation of our existing agreements,” ESPN told USA Today.

In the end, it all comes down to dollars and cents.

“No network benefits more from the status quo than ESPN, which has built a $7.5 billion revenue pipeline from the monthly subscriber fees that carriers pay programmers,” Bloomberg said. “That system depends on millions of customers who pay for ESPN but don’t watch it. And no one really knows what the pay-TV business would look like without these customers.”

According to Bloomberg, as it currently stands, cable providers (like Verizon) pay about $6.61 per household, per month, to carry ESPN. If the sports network were available in an a la carte bundle instead, and only those who watched the network paid for it, “the network would need to charge them each $22.58 per month to match its current revenue from subscriber fees,” Bloomberg said.

Simply stated, ESPN relies on consumers who don’t watch the sports network to subsidize it.

ESPN and rival sports networks use these viewers as leverage with carriers to pry money from non-sports customers. In a post-bundle world, they’d have to find a way to replace this subsidy.

This is just the latest shift in the pay-TV industry, with Verizon attempting to give consumers the a la carte channel offerings they want, and traditional cable kings, like ESPN, hesitant to change.

What do you think of ESPN’s lawsuit? Do you have cable? If so, do you watch ESPN? Share your comments below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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