Verizon Responds To Internet Video Competition With More Flexible Cable TV Packages, ESPN Immediately Whines

from the the-worldwide-leader-in-crying dept

Tue, Apr 21st 2015 6:14am — Karl Bode

Thanks to loosening broadcaster licensing restrictions, 2015 is birthing a number of more interesting Internet video platforms, including Sony's Playstation Vue and Dish's Sling TV. The latter has glacially moved the industry needle toward marginally-more-flexible cable TV pricing options, offering users a $20 base TV package that can be complemented with a variety of additional $5 "channel packs." Users are tired of bi-annual rate hikes for bloated channel budgets, and these services are only just giving an early glimpse into the more flexible programming options that will be the TV industry norm within a decade.

Better yet, they're actually forcing some pay TV companies to adapt. Verizon, for example, last week announced that the company would be offering up a variety of new channel packs and add ons that bring a little more flexibility to the telco's traditionally rigid bundles. Mirroring the Sling TV approach, Verizon now says the company will be offering users the option to buy a base TV package starting at $55 a month, after which users can tack on extra channel packs for $10 each. Here's a better idea of what it looks like:

Verizon executives have traditionally been a little more progressively-minded about cord cutting than its industry counterparts (as in, actually occasionally admitting it exists), and this is a pretty clear play to not only cash in on cable companies' inflexibility, but try and prevent cord cutting. Since you usually can't see the true cost of a cable subscription until after you've gotten your bill (and seen all of the fees and obnoxious surcharges and caveats layered upon it), it's probably premature to call Verizon's effort revolutionary. But it's at least a start for an industry that has been swimming upstream and ignoring consumer demands for more than a decade.

Interestingly, it looks like Verizon didn't bother to tell any of its broadcast partners about its plans. Those partners, notably Disney and ESPN, immediately cried foul over the plans, claiming that Verizon's offers violate existing contracts:

"Media reports about Verizon’s new contemplated bundles describe packages that would not be authorized by our existing agreements. Among other issues, our contracts clearly provide that neither ESPN nor ESPN2 may be distributed in a separate sports package."...ESPN’s statement — which complains specifically about having its networks relegated to an optional sports tier, instead of being included in the base package — suggests that Verizon never got an agreement from the programmer before it announced its plan. A person familiar with another programmer included in Verizon’s offering said that programmer hadn’t signed off on Verizon’s plan either. That person suggested that Verizon thought its agreements allowed it to try different offerings as a limited test."

The bloated cost of sports programming is one of the biggest reasons for soaring cable bills (as if either broadcasters and cable operators need reasons at this point), and Verizon's clearly firing a warning shot over the broadcasters' bow in regards to being able to shift these costly options into add-on tiers. That's great for consumers, but it obviously lessens ESPN's out-front consumer-facing power and overall reach. ESPN would love things to remain status quo indefinitely, but that's clearly not a sustainable position. The traditional cable bundle is a burning, Hindenburg-esque cash cow that's destined to crash, and the "worldwide leader in sports" would probably be better off accelerating its adaptation to the new paradigm.

Of course that's not going to happen. Customers who don't care about sports are first in line to cut the cord, and as those users refuse to subsidize everybody else, ESPN's first impulse will be to raise rates on customers that do watch sports in order to keep the current cash cow afloat. Simultaneously you can be sure that ESPN's lawyers are huddled around the conference table as we speak, contemplating a lawsuit they believe will magically freeze time indefinitely. But if Verizon doesn't help blow up the bundle somebody else will, whether that's Internet video (where ESPN at least still gets paid) or increased sporting event piracy.

Whatever ESPN's approach (and you'd hope it would be more progressively minded), this is definitely the opening salvo in a much broader -- and necessary -- cable and broadcast industry war over breaking up the traditional cable bundle.

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Filed Under: a la carte, internet video, over the top
Companies: disney, espn, verizon

29 Comments

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Violynne (profile), 21 Apr 2015 @ 6:39am

"Those partners, notably Disney and ESPN..."
One in the same.

Disney. Why does this company keep coming up in every discussion of innovation as the evil character.

It's about time this evil character is dealt with, preferably in Disney fashion of killing them off.
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Anonymous Coward, 21 Apr 2015 @ 6:55am

I stopped subscribing to cable both because I was tired of subsidizing things I absolutely did not want and because of the price exceeding the value of the things I did want.
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gethang, 21 Apr 2015 @ 6:56am

i want cable to go to the McDonald's model: whenever i find myself forced to eat McDonald's, i don't have to order the ENTIRE f*cking menu to get one goddamned cheeseburger.
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streetlight (profile), 21 Apr 2015 @ 6:59am

I haven't seen what's in each Channel Pack option
What is in each of the channel pack? My guess is the Base service and the Channel Packs only have channels with advertising. If you want something without ads like the Encore channels or the various ...plex (Retroplex, Movieplex) ad free channels, they'll not be $10 per pack. Do these prices include HD versions of the channels or is that an extra charge? Our household almost never watch ad supported channels. I haven't gone to Verizon's website to check things out. Lots of questions remain unanswered here.
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Mason Wheeler (profile), 21 Apr 2015 @ 6:59am

Re:
Throw them off of something very tall? Sounds like a plan...
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AnonCow, 21 Apr 2015 @ 7:11am

This is just as scam from Verizon. Offer the pricing that consumers want and then retract it blaming Disney and ESPN.

"Oh, it isn't our fault."
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Anonymous Coward, 21 Apr 2015 @ 7:14am

The biggest problem I see with this new offering is that it seems you must purchase the base channels which is the most expensive part before you can add the smaller packs of channels but there are no channels I would watch in the base package except for the major OTA networks. Verizon's website shows a lot of religious programming and shopping networks and some other stuff I doubt I would watch.

Now if I could just buy what they call the "Enterainment" pack, that would be perfect. It shows TNT, USA, SYFY, FX, WGN and a few more channels which would be all I need. I would even be willing to pay $20 for that package by itself.
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Karl Bode (profile), 21 Apr 2015 @ 7:19am

Re: I haven't seen what's in each Channel Pack option
I'm still reading the fine print and asking questions of users that sign up for it, but I believe Verizon is including the HD versions of the channels without the historically obnoxious "HD fee."
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nasch (profile), 21 Apr 2015 @ 7:30am

ESPN
These channel packages are not the biggest threat to ESPN's future. Their biggest threat is people growing up without cable TV and without being accustomed to watching sports at all. Those people will not care about televised sports and will not be willing to pay to get it. They should be desperately trying to make sure as many people as possible have access to sports programming, lest in 30 years they don't have a viable customer base. But I doubt they're looking ahead beyond the next broadcast rights deal.
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Just Another Anonymous Troll, 21 Apr 2015 @ 7:46am

Re:
Kill them off like one of their own villains? That's horrible!

They always pan away before the impact, and I wanna see the satisfying splat!
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Anonymous Coward, 21 Apr 2015 @ 7:48am

Re: ESPN
Heck, I grew up with cable TV shows, and wouldn't mind at all if my channel lineup became less cluttered via the disappearance of sports. No more overtimes caused by vacuous after-game commentary pushing away better-quality content scheduled after its time slot.
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DannyB (profile), 21 Apr 2015 @ 8:05am

Verizon here is a suggestion
Replace
Standalone (No Internet)
with
Standalone (No TV, No Phone)

Then replace
Double Play (TV + Internet)
with
Double Pay (TV + Internet)

Similarly, Triple Play with Triple Pay.

Then I think you will be on to something.
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Anonymous Coward, 21 Apr 2015 @ 8:16am

The only reason Verizon is "a little more progressively-minded about cord cutting" is that they plan to make even more money off of the artificial bandwidth caps they put in place for those people.
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Village Idiot (profile), 21 Apr 2015 @ 8:34am

$55/mo is the lowest option of their new more granular plan??? Wtf were they charging for their base option before? $55/mo for rigid television does not seem like a step forward to me, but then again, I have completely forgot what it felt like to be a cable television subscriber.
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Dave (profile), 21 Apr 2015 @ 8:57am

Verizon will lose this one.
Guys, if Verizon is violating a contractual agreement, then they're violating a contractual agreement. Verizon can pull this stunt on individual customers who can't afford to fight back, but against Disney? They'll lose.

Whatever new TV paradigm Verizon is trying to create here, worthwhile or otherwise, is irrelevant. This is going to come down to contract law, and if the contract specifically states that Verizon cannot offer ESPN in a separate sports tier, Disney will force Verizon to honor the contract -- something Verizon probably does to enough of its wireless customers to deserve that.

In the meantime, ESPN has lost 6 million customers in the last 4 years. No matter -- they can still demand the terms they want, including that 6.5% annual carriage fee increase, because they have 20 of the top 21 highest-rated cable TV broadcasts of all time. (I believe the Kentucky-Wisconsin college basketball semifinal on TBS a few weeks ago cracked ESPN's complete hold on the top 20.) They won't really feel the pinch unless they lose another 20 million subs within the next five years or so, and even then, they can probably remain profitable and let sweetheart carriage deals with Sling TV and Apple TV pick up the slack.
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nasch (profile), 21 Apr 2015 @ 9:03am

Re: Verizon will lose this one.
They won't really feel the pinch unless they lose another 20 million subs within the next five years or so, and even then, they can probably remain profitable and let sweetheart carriage deals with Sling TV and Apple TV pick up the slack.

For a while... but if they don't do something different, they're facing a long (or perhaps not all that long) decline into irrelevance, followed by bankruptcy.
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radix (profile), 21 Apr 2015 @ 9:29am

Re: Verizon will lose this one.
Am I missing something?

All Disney/ESPN seems to be upset about is putting ESPN into a "sports tier." But there's no indication here that ESPN isn't included in the base package.

Besides, if Verizon really wanted to bust the ESPN racket, they could just wait until the current contract is up, then simply *not offer* ESPN, cut prices by $7-8/month (or whatever they pay Disney for ESPN, maybe even keep an extra dollar or two to increase profits), and then perhaps partner with Sling TV to keep those customers connected ("better upgrade your internet package to get the best Sling TV experience!).
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nasch (profile), 21 Apr 2015 @ 9:37am

Re: Re: Verizon will lose this one.
All Disney/ESPN seems to be upset about is putting ESPN into a "sports tier." But there's no indication here that ESPN isn't included in the base package.

If it's included in the base package, why would it also be in the sports tier?

Besides, if Verizon really wanted to bust the ESPN racket, they could just wait until the current contract is up, then simply *not offer* ESPN...

They'll probably threaten to do that and then make a deal. Eventually ESPN won't be able to force TV providers to offer ESPN the way Disney wants them to.
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Anonymous Coward, 21 Apr 2015 @ 10:29am

Response to: AnonCow on Apr 21st, 2015 @ 7:11am
Do you even read?
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JBDragon (profile), 21 Apr 2015 @ 2:26pm

Re: Re: ESPN
I didn't grow up with Cable. It was a Antenna and one of them Boxes that could rotate the antenna to get channels in this spot and other channels at this spot. It wasn't great. I'd go next store to watch MTV once in a while. Back when it was actually Music Television!!!! HBO was the only Premium channel you could get.

When I was living on my own I got Cable, and I had it for about 18 years. TV only most of that time and Internet much later. It was just ME living there and 1 TV and No Premium channels, Just HD TV service with a Duel DVR Box and Mid speed Internet and it was $170 a month!!!! I hating that bill every month. What am I getting? I could never watch enough TV or use the Internet enough to justify that. I got my House a few years ago and ended Paying for TV service. I went from Comcast to AT&T U-Verse. I get Internet ONLY for $35 a month. It's not the fastest speed but it's fast enough to stream HD content from Netflix.

With the Internet, I have more content to watch then ever before. In fact to much to watch and so little time to do it. I had my Dad Move into my house because he lost his. He offered to pay to get Satellite TV service and I told him I didn't want it. I wanted no DISH on my house. I have a Large Antenna and that's all I need. He's used to things now. He doesn't work. I think he watches to much TV as it is.

I saw someplace a while back that only 4% of Cable subscribers actually watch the Sport channels. That means 96% of the subscribers are Subsidizing the costs!!! These Sports Channels cost far, far more to get then any other channel and costs are continuing to shoot up. Not that the Broadcast channels and other cable channels aren't greedy and want a bit rate increase also.

These crap is shooting up in price 10 times faster then my paycheck and for what? how about the people who actually want the sports garbage pay the real FULL cost to have it!!! You want Sports, Not a problem, it's another $50 on top of everything else per month!!! Because most everyone else is no longer subsidizing it!!!

Maybe I just don't get grown Men playing Sports making Millions. While people are cheering and saying how WE won. you didn't do anything let alone WIN, they. playing the game won!!! GAME being the key word. I don't get it. I shouldn't be forced to pay for it. Cutting the Cord I'm free to NOT pay for it or any of the other crap. 200 Channels and only watch 20 of them. That's how it was when I had Comcast. They screw you by making the channel packages be so that you have to get the Most expensive one just to get that 1 channel that you want. So F them I'm NEVER paying for TV service ever again. At least that way. I pay for Netflix because the price is right. I'm not forced to pay for SportFlix on top of it and cost 3 times at much!!!
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Jim, 21 Apr 2015 @ 2:33pm

Re: ESPN
ESPN's biggest problem is that they're stuck in a number of expensive sports rights contracts for years, well into the 2020's, especially in college sports. These, along with struggling pro leagues, have declined in popularity rapidly in recent years. Not only have young people gotten used to not watching televised sports, many only watch sports in bars or at friend's houses.

Ultimately, events are moving faster than the sports bundlers, or the sports leagues, had envisioned. I watch sports myself, but I've become disgusted with most leagues over the years, and I look forward to the fight between the networks and the leagues, when the latter has exorbitant player salaries to pay, and the former doesn't have the cash.
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nasch (profile), 21 Apr 2015 @ 2:48pm

Re: Re: ESPN
These, along with struggling pro leagues, have declined in popularity rapidly in recent years.

Really? From what I've heard they're still going strong. If I'm wrong I would be interested to learn about it though.
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John Fenderson (profile), 21 Apr 2015 @ 3:38pm

Re: Re: ESPN
"ESPN's biggest problem is that they're stuck in a number of expensive sports rights contracts for years"

Live by the sword, die by the sword.
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Zonker, 21 Apr 2015 @ 3:55pm

I wish my cable provider would do this, and if ESPN complained just dropped them altogether. We never watch ESPN in my house, yet I've been forced to subsidize them for years. Literally the only sports games we watch on TV is the occasional University of Oregon football game (the Civil War and bowl games) because of relatives who attended that college, and those games are always aired on SportsNet now or we can go to any local sports bar or friend's house to watch.

I, for one, am sick and tired of subsidizing ESPN and the other sports networks when we only watch maybe one to three games a year, if that.
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dollup15, 22 Apr 2015 @ 6:21am

Just recently cut the cord. Got an HDTV antenna that gets all our local stations, and SlingTV that lets us get some basic cable channels. It's not perfect, but it's a heck of a lot better than paying out the wazoo for 100+ channels, three-quarters of which we never watch.
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ComputerAddict (profile), 22 Apr 2015 @ 8:52am

Re: Verizon will lose this one.
Verizon can get around the contract issues by having 2 offerings, the status-quo of what they have now, and a new second offering of base+packages as they propose. If you want ESPN (Or any other grouping that wont get on-board) you CANT use the new option. But that will leave Verizon giving customers what they want, and Customers yelling at at content providers to add their channels to the new offering.
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nasch (profile), 22 Apr 2015 @ 9:50am

Re: Re: Verizon will lose this one.
Verizon can get around the contract issues by having 2 offerings, the status-quo of what they have now, and a new second offering of base+packages as they propose.

Are you sure the contract doesn't forbid that?
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Anonymous Coward, 22 Apr 2015 @ 10:28am

Great article breaking out the costs for common cable channnels it's currently estimated Disney is $1.21 and ESPN is $6.04.
As someone that watches neither and a whole slew of other costly sports channels etc... I like this idea it's also a good compromise. I mean I like some oddball channels that wouldn't make it if it was truly al a carte per channel and per channel would mean raising the cost. But doing packages means I can support say science channels and not sports or kids tv

http://blogs.wsj.com/numbers/how-much-cable-subscribers-pay-per-channel-1626/
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programvb.com/2017/03/nilesat-channel-frequencies, 31 Mar 2017 @ 5:24pm

programvb.com
Whatever new TV paradigm Verizon is trying to create here, worthwhile or otherwise, is irrelevant. This is going to come down to contract law, and if the contract specifically states that Verizon cannot offer ESPN in a separate sports tier, Disney will force Verizon to honor the contract -- something Verizon probably does to enough of its wireless customers to deserve that.
http://www.programvb.com/2017/03/Tv-Al-shabab.html
http://www.programvb.com/2017/03/channel-freq uency-elqanah-news.html
http://www.programvb.com/2017/03/channel-frequencydaash.html
http://www.progra mvb.com/2017/03/Frequency-Channel-Arab-Sat-Badr.html
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