ESPN su­ing Ver­i­zon over sports chan­nel


ESPN is su­ing Ver­i­zon in an es­ca­lat­ing clash over how the popular sports chan­nel is be­ing sold in a dis­counted pay-TV pack­age.

The com­plaint filed Mon­day in New York’s state Supreme Court al­leges Ver­i­zon is break­ing its con­tract with ESPN, owned by Walt Dis­ney Co., by un­bundling the sports chan­nel from the main pro­gram­ming line-up of Ver­i­zon’s FiOS TV.

The legal show­down could have rip­ple ef­fects on how other pay-TV pro­gram­ming is pack­aged. Ca­ble and satel­lite ser­vices are scram­bling to re­tain sub­scribers as the ad­vent of In­ter­net video spawns new and less ex­pen­sive ways to stay en­ter­tained and in­formed.

Ver­i­zon is al­low­ing cus­tomers to sub­scribe to a bare-bones pack­age of 35 chan­nels for US$55 per month, with the op­tion of adding other two other tiers of pro­gram­ming such as a sports pack­age that in­cludes ESPN. The stream­lined packages are meant to ap­peal to bud­get-minded con­sumers weary of pay­ing for dozens of TV chan­nels that they rarely watch.

Pay-TV providers such as Ver­i­zon are un­der pres­sure to give sub­scribers cheaper and more flex­i­ble choices as they face in­ten­si­fy­ing com­pe­ti­tion from Net­flix, Hulu, Ama­zon. com and other on­line ser­vices that stream TV se­ries and movies over high-speed In­ter­net con­nec­tions.

Those mar­ket forces prompted Time Warner Inc.’s HBO, a long-time sta­ple in pay-TV line­ups, to re­cently begin sell­ing an In­ter­ne­tonly ser­vice for US$15 per month.

“Ver­i­zon’s cur­rent skir­mish speaks to the trou­ble dis­trib­u­tors will have in cre­at­ing a slim­mer pack­age that is at­trac­tive both from an eco­nomic and con­tent per­spec­tive,” Mof­fet­tNathanson Re­search wrote in an anal­y­sis Mon­day.

ESPN is fight­ing Ver­i­zon’s dis­counted “cus­tom TV” pack­age be­cause it gives sub­scribers the op­tion of by­pass­ing the sports chan­nel in their pro­gram­ming se­lec­tions. That vi­o­lates pay- TV re­quire­ments stip­u­lat­ing that ESPN be in­cluded in the main bun­dle of pro­gram­ming, ac­cord­ing to ESPN. De­spite the al­leged breach of con­tract, ESPN hasn’t yet pulled its chan­nel from the sports pack that Ver­i­zon is sell­ing as part of its dis­counted ser­vice.

New York-based Ver­i­zon Com­mu­ni­ca­tions Inc. de­nies its new op­tions break its ESPN con­tract. “Con­sumers have spo­ken loud and clear that they want choice, and the in­dus­try should be fo­cused on giv­ing con­sumers what they want,” the com­pany said in re­sponse to ESPN’s law­suit.

In its state­ment, ESPN said it fa­vors in­no­va­tion as long as it doesn’t vi­o­late ex­ist­ing agree­ments. The sports chan­nel re­cently worked out a deal that en­abled Dish TV’s Sling ser­vice to in­clude ESPN and ESPN2 in an In­ter­net video ser­vice that costs about US$20 per month. ESPN is in­cluded in the main pro­gram­ming line-up of Sling, though.

While ESPN took Ver­i­zon to court, CBS Sports Net­work dis­closed plans to join Veri- zon’s sep­a­rate sports pack­age be­gin­ning May 1.

Few de­tails of ESPN’s claims against Ver­i­zon were avail­able Mon­day be­cause the ma­te­rial in the law­suit is cur­rently con­sid­ered con­fi­den­tial.

ESPN is highly prized by pay-TV providers and ad­ver­tis­ers be­cause the chan­nel has the rights to a va­ri­ety of ma­jor pro­fes­sional and col­lege sports that still com­mand large au­di­ence who watch the pro­gram­ming live in­stead of on DVR record­ings that let view­ers skip the com­mer­cials.

The sports chan­nel’s al­lure has es­tab­lished ESPN as the most ex­pen­sive chan­nel in ba­sic pay-TV chan­nels, based on es­ti­mates from data provider SNL Ka­gan. ESPN charges pay-TV dis­trib­u­tors US$6.61 per monthly sub­scriber com­pared to just US$1.65 per sub­scriber for the sec­ond most ex­pen­sive ba­sic chan­nel, TNT.


This Sept. 16, 2013 photo shows the ESPN logo prior to an NFL foot­ball game be­tween the Cincin­nati Ben­gals and the Pitts­burgh Steel­ers, in Cincin­nati.

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