ESPN strikes back at Verizon’s new channel lineup that moved ESPN and Disney off basic cable and into theme-specific packages with a lawsuit alleging breach of contract against the telecommunication company. As more people continue to drop cable TV in favor on online streaming services like Hulu and Netflix, the demand for a-la-carte cable channels – pay only for what you watch -continues to mount. ESPN has more to lose than Verizon because this lawsuit – unless a settlement is reached – could expose the inter-workings of how ESPN works on cable systems.
What is Verizon offering? Peter Kafka of Re/Code has an explanation:
Here’s the latest: An offer from Verizon that lets its Fios TV customers buy a “skinny bundle” of TV channels, and then augment it with a variety of “channel packs” — groups of networks with similar themes, like a sports pack that includes ESPN and Fox Sports — that they can swap out each month.
Here’s where Disney gets upset with Verizon. When you subscribe to cable, there’s a limited number of channels (usually 55 to 65 and sometimes more) subscribers get with the basic package. It depends on the contracts with cable channels that dictate what’s on basic and what’s on digital, which is why Fox News is on basic and Fox Business is on digital.
And that’s why Disney/ESPN is suing Verizon because ESPN isn’t on the base package. If it was, this wouldn’t be a problem. What Verizon wants to do is different, they want to blow up the cable bundle.
Per the New York Times:
“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,” an ESPN spokeswoman said. “We simply ask that Verizon abide by the terms of our contracts.”
“Consumers have spoken loud and clear that they want choice, and the industry should be focused on giving consumers what they want,” a Verizon spokeswoman said in response to the lawsuit. “We are well within our rights under our agreements to offer our customers these choices.”
Unless both sides settle, Verizon has nothing to lose in the lawsuit. A judge can rule against Verizon and they would be forced to remove the “mix and match” package and probably a fine, but that’s about it. ESPN has a lot to lose because Verizon could – and possibly should – submit their agreement with Disney as evidence.
How ESPN negotiates with cable companies will become public knowledge: how much the channel costs, where the channel is placed, what gets determined to be in the standard package and what goes in digital.
Verizon doesn’t have much to risk except further annoying the cable industry. ESPN is the one that should be worrying.