Disney has decided to play hardball with Verizon for offering its ESPN cable channel as an add-on to its new Custom TV FiOS package rather than as part of its basic tier. This morning ESPN filed a lawsuit alleging breech of contract.
Verizon earlier this month announced plans to offer the skinny bundle of content at $55 a month. The telco included some three dozen channels in its basic offering, adding other content “packs” for an additional $10 each. ESPN makes up the core of its “Sports Pack.”
In a statement ESPN said that it “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 CFO Fran Shammo, during the company’s earnings call with analysts, put the ball squarely in ESPN and parent Disney’s court, saying it rolled out cheaper bundles because it was what consumers wanted.
"I think the right way to answer this without getting too public about our contractual situations –— look, this is a product that the consumer wants," Shammo said. "It’s all about consumer choice. I mean, if you look at the TV bundles today, most people only on average watch 17 channels. So this a way to give consumers what they want on a choice basis."
The suit against Verizon was filed Monday in New York Supreme Court. ESPN is seeking to stop Verizon from "unfairly depriving" it of "the benefits of its bargain."
An ESPN spokesperson told the Washington Post that the case wasn’t as much about money as it was about enforcing agreements and assuring that partners can’t “unilaterally change deals” without agreement from their partners.
Sling TV, which introduced its own slim bundle offering in February, reportedly negotiated with content owners for more than a year to hammer out agreements that allowed it to “bust bundles.” For the $20-a-month product.
The lawsuit creates an even more contentions environment for content owners and service providers, much of it being driven by rising content costs that have stretched operator budgets already hurt by cord cutting, competition and increased churn.
And, while ESPN is the first to throw a legal challenge at Verizon, it may not be the last. Both NBC and Fox say they, too, have issues with the way the Custom TV is being handled.
Stay tuned, this one will get ugly.
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