ESPN takes Verizon bundle battle to court, alleging breach of contract
The battle over Verizon’s new customizable pay-TV bundle escalated Monday morning when sports network ESPN sued the massive telecom for an alleged breach of contract.
ESPN, a division of The Walt Disney Company (DIS), filed a lawsuit in New York’s Supreme Court in which the network is seeking an injunction against Verizon’s new FiOS Custom TV service as well as damages.
“ESPN is at the forefront of embracing innovative ways to deliver high-quality content and value to consumers on multiple platforms, but that must be done in compliance with our agreements,” the network told Fortune. We simply ask that Verizon abide by the terms of our contracts.”
ESPN spoke out last week after Verizon (VZ) unveiled the cheaper, slimmed-down FiOS bundle. The network said in a statement that the new service, which prices ESPN and ESPN 2 separately from the bundle’s core package of channels, “would not be authorized by our existing agreements [with Verizon].” In the lawsuit, ESPN asked the state court to stop Verizon from “unfairly depriving” the network of “the benefits of its bargain.”
ESPN wasn’t the only broadcaster to slam Verizon’s new offering last week, as both Comcast (CMCSA) and 21st Century Fox (FOX) raised similar objections to the Custom TV service, saying that the bundle’s pricing structure is not in line with their respective contract terms with Verizon. Much like ESPN, various cable channels owned by Comcast and Fox are included in separately-priced channel packages as part of the new Verizon bundle.
For its part, Verizon defended the new bundle plan in various forums last week, including on an earnings call in which Verizon Chief Financial Officer Fran Shammo claimed that the service is allowed under its current agreements with broadcasters and that the new FiOS offering is “all about consumer choice.”
Verizon struck a similar tone when the company responded to the ESPN lawsuit on Monday. “Consumers have spoken loud and clear that they want choice, and the industry should be focused on giving consumers what they want,” Verizon said in a statement. “We are well within our rights under our agreements to offer customers these choices.”
The new service from Verizon comes as the cable provider looks to compete with a growing number of rivals offering services outside of the traditional cable bundle model: from popular streaming services such as Netflix (NFLX) to services such as the Dish Network’s (DISH) Sling TV, an online streaming subscription service that offers cord-cutters the benefits of live television without a more expensive cable subscription.
Verizon is holding firm with the stance that its new service does not violate the terms of its agreements with various broadcasters, but ESPN could be in the best position of any network to force renegotiations. Sling TV earned what was seen as a huge coup when it inked a content agreement with Disney and ESPN, as the latter’s wealth of live sports programming, in particular, is generally seen as a necessary component for any pay-TV provider looking to compete with the traditional cable bundle.
It could be with that in mind that Verizon pushed out a timely press release Monday afternoon announcing the addition of the CBS Sports Network to FiOS Custom TV’s sports-centric channel package starting this weekend.