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ESPN Sues Verizon Over New FiOS TV Packages, Citing Breach Of Current Contract

ESPN has filed a lawsuit against Verizon "alleging the telecom company’s new FiOS TV packages breach a contract covering how the sports TV network is to be distributed," according to Joe Flint of the WALL STREET JOURNAL. Verizon began offering “Custom TV” plans last week "starting at $55 a month that allow viewers to buy a basic set of channels, including broadcasters and some cable networks, and layer on tiers of channels in genres like sports, kids and lifestyle." ESPN argues that while distributors have the "right to create smaller packages for customers that exclude its networks, distributors can’t then put ESPN channels into a separate add-on sports bundle." Verizon said that it is "trying to give consumers more choice and is within its rights." Verizon added that CBS is allowing CBS Sports Network "to be placed in a separate tier of similar networks" (WALL STREET JOURNAL, 4/28). USA TODAY's Mike Snider in a front-page piece notes subscribers can "choose two of seven genre-specific channel packs -- kids, pop culture, lifestyle, entertainment, news and information, sports and sports plus." ESPN, ESPN2 and ESPNU "are included in the sports package; ESPNews is in the sports-plus pack." In its filing yesterday, ESPN "asked the judge to enforce the current contract and to prevent Verizon from 'unfairly depriving (ESPN) of the benefit of its bargain' and to assess damages of $500,000 or more" (USA TODAY, 4/28).

FIRST SHOTS FIRED: ADWEEK's Jason Lynch noted with both companies "firmly entrenched, ESPN's lawsuit appears to be the first salvo fired in what will be a bloody battle for slimmer cable packages as pay TV providers fight to keep consumers from cutting the cord" (ADWEEK.com, 4/27). CNBC's Becky Quick noted ESPN “has the most right to be upset in this situation because first of all, they're supposed to be on the very basic cable plan.” On the tier that Verizon currently has "stuck them with, now if you want ESPN you also are paying to get Fox Sports and every other sports competitor, along with them." Quick: "ESPN doesn't want anybody riding their coattails.” CNBC’s Andrew Ross Sorkin added, “But the whole point of these conglomerates is that leverage point, that’s what this is all about” (“Squawk Box,” CNBC, 4/28). RE/CODE's Edmund Lee noted the "so-called big bundle has been the foundation of major TV companies’ business for years," and 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" (RECODE.net, 4/27).

WHAT LIES AHEAD: In N.Y., Claire Atkinson reports Verizon "could be leaving ESPN out of its basic bundle in order to shore up public support for a legislative battle to prevent distributors from being forced to put expensive sports channels in their cheapest packages." A source said, "They are smart people at Verizon. Are they executing a strategy here to break up the bundle and get a groundswell of public support for legislation to support what they are doing?” (N.Y. POST, 4/28). 

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