ESPN has said for over a week now that Verizon’s attempt to sell skinny bundles of TV channels violates agreements it has with the distributor, which prevents Verizon from breaking up the bigger bundle of TV channels that EPSN sells.
ESPN Is Suing Verizon Because It’s Trying to Sell Small Bundles of TV Channels
ESPN filed a lawsuit in New York this morning against Verizon for breach of contract.
Thinkstock / Artur Marciniec
It’s not just a statement anymore. ESPN filed a lawsuit in New York this morning against Verizon for breach of contract and added a new statement:
“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. We simply ask that Verizon abide by the terms of our contracts.”
Verizon’s offering attempts to give its pay-TV customers some choice in the channels they pay for with a base set of networks as well as the ability to add on smaller bundles of channels in categories such as sports and entertainment.
But the so-called big bundle has been the foundation of major TV companies’ business for years. ESPN and parent company Disney, along with Time Warner Inc. (TNT, TBS, CNN), Viacom (MTV, Nickelodeon, Comedy Central) and 21st Century Fox (FX, Fox News, Fox), sell their channels in one big package to the distributors, even if many pay-TV customers typically only watch a dozen at most.
The TV companies do this so they can claim wider distribution for all their networks, which helps them sell advertising, as well as garnering carriage fees for every channel, even if some of the lesser-watched ones only bring a few nickels per subscriber each month.
Of course, any attempt to break this bundle is a threat to the underlying business model. What adds to the drama here is that while programmers and distributors have engaged in plenty of fights before, usually over contract renewals that sometimes have led to blackouts, they rarely go to court. Also, the fight is over an existing contract, not one they’re attempting to renew.
Verizon, however, has said its current agreement gives it enough wiggle room to offer these skinny bundles, as CFO Fran Shammo told investors last week: “We believe that we are allowed to offer these packages under our existing contracts.”
And in response to today’s lawsuit a Verizon spokesperson said: “Consumers have spoken loud and clear that they want choice, and the industry should be focused on giving consumers what they want. We are well within our rights under our agreements to offer customers these choices.”
It’s true consumers have complained for years that they can’t simply buy the channels they want without being saddled with a bunch of networks they don’t watch. It can also be argued from the programmer’s point of view that selling the big bundle helps to subsidize the popular channels. In other words, Viacom could just sell MTV at a much higher rate than it currently does as part of a bundle, which might otherwise cost the consumer about the same.
Another factor pushing the players in this direction is all the so-called “over the top” offerings, or Internet TV services from Dish with Sling TV and HBO Now, which are moves toward small bundles or a la carte plans that people have wanted for a while.
This article originally appeared on Recode.net.
