Verizon's attempt to offer smaller, cheaper television bundles could be short-lived if Disney's ESPN has its way.
The sports broadcasting giant has sued Verizon over new "Custom TV" bundles that give users a small base package of channels plus optional add-on packs, CNBC reports. The new TV package arrived last week, and costs $25 less per month than Verizon's standard 235-channel bundle. ESPN is part of the "Sports" add-on pack, which costs $10 extra per month if subscribers don't choose it as one of their two free add-ons. (Check out my latest cord-cutting column for all the details and gotchas with Custom TV.)
Even before filing the lawsuit, ESPN had made its displeasure known. The company had been telling reporters that Custom TV "would not be authorized by our existing agreements," which don't allow ESPN or ESPN2 to be part of an optional sports package. Fox Sports and NBC have also been grumbling about Verizon's plan, but so far haven't piled on with their own lawsuits.
Still, Verizon believes it's within its rights to offer skinny bundles to TV subscribers. "We believe that we are allowed to offer these packages under our existing contracts," CFO Fran Shammo said in an earnings call last week.
Clearly, both sides are interpreting their contracts differently. The question is whether Verizon will try to defend its interpretation in court, or collapse under pressure.
The story behind the story: This dust-up only highlights the strain that cord-cutting has put on the traditional pay TV business. Verizon realizes its subscriber base is at risk, and wants to reach the growing number of people who are walking away from expensive TV package. Networks, however, don't want to lose the revenue that comes with being part of a huge channel bundle. Even if Custom TV dies, it's unlikely that TV providers will stop trying to come up with smaller packages.