ESPN Feuds with Verizon Over New Cable Bundles That Don’t Include Them

Everyone involved with cable television knows that a la carte programming is coming, but it appears ESPN, the network most responsible for inflating sports cable bubble, isn’t going down without a fight.

Verizon FiOS, a new fiber optic television and internet offering from Verizon, made their cable packages available to the customers yesterday, which included pared down options that makes ESPN’s channels an option, rather than a necessary part of the pay television experience.

Their basic package includes major broadcasters and other basic cable channels like CNN and AMC, but makes ESPN and ESPN 2 part of a separate “sports” tier. The Walt Disney Company, who owns ESPN, made statement last Friday stating:  “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.”

The reason why Disney is protesting Verizon’s new offering is because ESPN makes $6.5 billion, roughly two-thirds of their revenue, from cable and satellite affiliate fees. If ESPN begins to be relegated to optional tiers by cable companies, those fees would undoubtedly decrease the next time they meet at the negotiating table. This is a position ESPN can ill afford to end up in as they have billions of dollars in rights fees guaranteed to most of the major US pro sports leagues for years to come.

With cord-cutting slowly gaining steam and many Millennials not even buying into cable television at all, cable operators are grudgingly realizing that changing their business model is the only way to retain the next generation of television viewers, hence Dish Networks’s Sling TV and now Verizon FiOS.

However, the deflation of the sports bubble will probably take years to begin deflating, as ESPN has over 100 million subscribers via cable providers and cord-cutting isn’t increasing at the rates initially projected. Most likely, it will come, as Hemingway wrote in The Sun Also Rises, “Two ways, gradually and then suddenly.” Consider these new cable offerings the first shot across the bow.

 

 



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Michael Tunney is a managing editor at Contently. He has also worked on marketing campaigns for bestselling authors like Robert Greene, Ryan Holiday, and James Altucher. Follow him on Twitter @mike_tunney.

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Daniel O'Brien
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Daniel O'Brien

I feel like ESPN would be better off going on the subscription route. They make around $5/month for carrier fees, why not charge $10/month for a streaming service? Pretty sure they hold streaming rights for the majority of their live content. They could bundle Insider with it too. If the TV carriers are going to start pushing out packages that will drop sports programming, ESPN should feel free to launch a subscription service to screw over cable/satellite operators.

Ironically, at the rate all of these subscription services are popping up consumers will eventually be paying more than they were on their cable bill. Netflix, Prime, Hulu, HBO Now, and an ESPN stream would be pushing $50 easy

Jason
Guest
Jason

ESPN desperately wants to be on the “Basic cable” plan so they can get millions of people to pay $5+ a month for a service they wouldn’t otherwise pay for.

Eric F
Guest
Eric F

You also have to look at the amount of money ESPN is making off of people that have cable bundles with ESPN included, but don’t actually watch ESPN. They still get money from the carrier for customers who have their channels but don’t actually watch ESPN. If they went subscription based they would only make money off people who actually wanted to watch their content. However I agree that if cable companies follow Verizon and start moving ESPN from the basic packages to sports packages it’s probably in ESPN’s best interest to go sub-based. Will be interesting to see how everything plays out with cable in general over the next few years.

flattop
Guest
flattop

To get home games off the MLB.TV package you have to subscribe to a cable operator. Does anyone know if Sling TV qualifies?

John Thacker
Guest
John Thacker

“If ESPN begins to be relegated to optional tiers by cable companies, those fees would undoubtedly decrease the next time they meet at the negotiating table. ”

ESPN/Disney appears to believe so. However, I would also expect them to ask a lot more money per subscriber on an optional tier than on a basic plan. I suspect that the biggest part of Disney’s objection is that Verizon is putting ESPN on an optional plan while still trying to pay Disney the same per subscriber fee as when it was included on the basic tier plan.

Disney will, rightly, argue that it would have insisted upon a higher fee per subscriber if its main networks were put on a higher or optional tier.

John Thacker
Guest
John Thacker

Almost certainly not; you have to in general subscribe to a cable operator that subscribes to the Regional Sports Network with local game rights. Sling TV does not have contracts with the owners of most RSNs. By contrast, Sony’s competing Playstation Vue does, but as a result it costs more.

Kris Gardham
Guest
Kris Gardham

I am 100% for the (non-physical, mother-in-law joke containing, you never spend time with me) domestic disputes that will arise from ESPN not being included by default. I live in Canada. I do not have a TV. This absolutely doesn’t pertain to me. However, I watch a lot of internet comedies and listen to a lot of podcasts, so the jokes arising from it certainly do.