Verizon’s attempt to take sports channels out of its basic cable package is setting up an epic standoff with some of the biggest media companies in the country.
ESPN, the biggest sports channel of them all, was the first to weigh in, saying that Verizon’s plan “would not be authorized by our existing agreements.”
On Tuesday, the owners of Fox Sports 1 and the NBC Sports Network seconded ESPN’s comments, demonstrating widespread opposition to the distributor’s plan.
Separately on Tuesday, Verizon Chief Financial Officer Francis Shammo defended the plan: “We believe that we are allowed to offer these packages under our existing contracts.”
The ongoing tug-of-war underscores what is a profound sense of uncertainty in the television industry these days. The traditional cable bundle — one big all-you-can-eat package of channels — has stayed intact for decades. But cable is now under enormous pressure from disruptive technologies and new distributors.
The business models for media companies like The Walt Disney Company, which owns ESPN, and Time Warner, which owns this web site, are predicated on cable subscriber fees. Every new threat to the bundle is taken seriously.
The companies are trying to stay ahead of possible changes by experimenting with new Internet subscription services like Sling TV by Dish Network.
But they’re also, in some cases, resisting experiments like the one Verizon is embarking on.
Verizon FiOS calls its new pricing plan “Custom TV.” The commercial for it portrays it as a la carte TV, letting customers pick and choose channels rather than receiving a big bundle of hundreds of them.
“What if you could pay for what you want, and not for what you don’t?” the narrator asks.
It’s not actually a la carte TV. But it’s moving in that direction. New customers receive a bundle of 35 basic channels, including CNN, Food Network and local TV stations. Then they can opt for various packages of other channels, including a sports package with ESPN, Fox Sports 1 and NBC Sports Network.
Because sports channels cost cable operators so much, removing them from the basic bundle of channels lets Verizon charge less.
Verizon announced the plan last week. ESPN came out over the weekend and said “our contracts clearly provide that neither ESPN nor ESPN2 may be distributed in a separate sports package.”
On Tuesday, Fox Sports concurred: “We reject Verizon’s view that it can pursue the new packaging scheme it announced yet still comply with our agreements. That said, we prefer to keep our commercial discussions confidential, and we will continue to address our concerns directly and privately with Verizon.”
NBCUniversal also indicated disagreement in a short statement: “Verizon’s announced ‘Custom TV’ package does not comply with our existing agreement.”
None of the media companies have publicly threatened legal action to date.
Shammo, the Verizon CFO, says his company is taking the customer’s side: “Look, this is a product that the consumer wants. It’s all about consumer choice.”