A high-stakes battle is shaping up over “skinny” packages of pay-TV channels.
This week, Verizon rolled out a new offering for its FiOS television service that allows customers to select smaller, customized packages of TV channels at lower price points than a typical pay-TV package.
Customers can subscribe to Verizon’s basic TV package that starts at $54.99 a month. It includes local broadcast stations, Food Network, HGTV, CNN and AMC. Subscribers then can opt for niche programming clusters called “channel packs.”
For example, Verizon offers a sports pack with ESPN, NBC Sports channel and the national Fox Sports 1 network. There is a children’s programming pack, which includes Nickelodeon, Disney Channel and Cartoon Network. Another is branded as the pop culture pack, with Comedy Central, MTV and E!
Walt Disney Co.'s ESPN quickly objected to the move, saying that its programming agreement with Verizon forbids the telecommunications giant from offering ESPN as part of a specialized sports tier.
Disney also is objecting to the positioning of its ABC Family and Disney Channels.
Disney’s reaction foreshadows a potentially high-profile struggle between media companies and pay-TV distributors over so-called skinny programming packages.
Media companies want to protect their most lucrative source of revenue: cable programming fees.
At the same time, distributors, including such giants as Verizon, Dish Network and DirecTV, are under pressure to find ways to offer customized packages as a way to hold onto customers who are considering cutting the cord.
Rather than hew to industry tradition -- offering hundreds of cable channels to subscribers for nearly $100 a month -- distributors are motivated to offer smaller, more affordable packages to remain competitive.
21st Century Fox and NBCUniversal on Tuesday joined Disney’s protest against Verizon’s customized packages.
“We reject Verizon’s view that it can pursue the new packaging scheme it announced yet still comply with our agreements,” Fox said in a statement.
NBCUniversal added: “Verizon’s announced ‘Custom TV’ package does not comply with our existing agreement.”
Separately, Viacom Inc., which owns MTV, Nickelodeon and Comedy Central, sent a letter asking Verizon to clarify its position.
Verizon, meanwhile, contends that it is on firm legal ground.
“As far as we are concerned, there is no dispute,” a Verizon spokeswoman said late Tuesday. “We believe we are allowed to offer consumers and small businesses this choice and flexibility under our existing contracts.”
Dish Network accelerated the skinny bundle trend earlier this year by offering an Internet-delivered product called Sling TV.
The difference in opinion between Verizon and the media companies might center on interpretations of subscriber thresholds.
Some programming contracts require that channels, such as ESPN, had to be offered in the most widely distributed package of channels. That requirement has been the glue that has held pay-TV packages together.
However, during the last round of contract talks, programming companies agreed to slightly lower the threshold. The move was intended to give distributors more flexibility to design more affordable pay-TV packages.