uploads/2015/07/VZ-FioS-digital-connections1.jpg

ESPN Sues Verizon over FiOS Custom TV

By

Updated

Verizon launches FiOS Custom TV

In April, Verizon (VZ) launched FiOS Custom TV, which allows viewers to subscribe to a smaller package of core channels. It includes more than 30 channels, including local channels, for $54.99 per month. Viewers can add up to seven theme-based packs for an additional cost of $10 each.

These theme-based packs are divided into the following groups: Kids, Pop Culture, Lifestyle, Entertainment, News & Info, Sports, and Sports Plus. For example, viewers interested in sports can watch ESPN in the Sports pack. For regional sports, they can opt for ESPN Classic in the Sports Plus pack.

As you can see in the above graph, Verizon had ~6 million video subscribers in the first quarter of 2015. The move by Verizon to launch FiOS Custom TV could be an attempt to retain its subscribers or to lure subscribers away from other pay-TV providers like Dish Network (DISH) and Comcast (CMCSA).

Article continues below advertisement

ESPN sues Verizon over FiOS Custom TV

After the launch of Verizon’s FiOS Custom TV, ESPN, the sports channel owned by The Walt Disney Company (DIS), filed a lawsuit in New York’s Supreme Court claiming Verizon is “unfairly depriving” it of “the benefits of its bargain.” ESPN has alleged that Verizon has violated its agreement, which provides that ESPN and ESPN2 should be in the same sports package and should not be distributed separately. The segregation could affect Disney’s Cable Networks revenue, since a major chunk comes from advertising revenues, or sale of time to advertisers in network programs.

ESPN’s case against Verizon suggests that Verizon never got the nod from its content providers before launching its FiOS Custom TV.

You can get a diversified exposure to Verizon by investing in the Technology Select Sector SPDR ETF (XLK), which holds 4.83% of the stock.

Advertisement

More From Market Realist