Verizon may have figured out how to lower ESPN's astronomical monthly fees

ESPN does not like Verizon’s new pricing strategy for FIOS.

The wireless carrier and cable provider announced this week that customers will now be able to opt out of bundles and customise its television packages to include mostly just the channels they watch — and possibly exclude others like ESPN.

Verizon’s new “Custom TV” plans have moved ESPN’s networks, which rank among the most profitable in the world, from basic cable to a sports “genre,” according to the company’s website.

This will impact the number of potential eyeballs the network can reach, which in turn can cause it to lose leverage in future contract negotiations.

All cable channels have carriage agreements, or contracts allowing providers to broadcast channels, that set monthly per-subscriber rates paid to them by providers.

ESPN and ESPN 2’s carriage agreements with Verizon require them to be on basic cable and also prohibit them from placing them on a sports tier. Basic cable has far more subscribers than any specialised tiers.

It all comes down to money — the fewer televisions that offer ESPN, the less money it can make from satellite and cable companies.

ESPN currently charges cable and satellite companies a monthly $US5.54 per subscriber fee, by far the highest in the industry. TNT, the second-most expensive network, charges a relatively paltry $US1.33 each month per subscriber.

ESPN ripped the announcement in a statement to Business Insider.

“Media reports about Verizon’s new contemplated bundles describe packages that would not be authorised by our existing agreements,” the network contended. “Among other issues, our contracts clearly provide that neither ESPN nor ESPN2 may be distributed in a separate sports package.”

The Disney-owned network did not respond to a question asking what potential action it would take to try to reverse Verizon’s tactics.

ESPN’s programming, which is dominated by live sporting events across almost every major sport, and several minor sports, is among the highest rated among all pay channels.

Fewer potential viewers means lower ratings. This could put the network in a weaker negotiating position when carriage agreements are up for renewal.

Custom TV is built on a base of 35 channels, none of which are ESPN, and augmented by several genres including kids, pop culture, lifestyle, entertainment, news & info, sports and sports plus.

“We believe we are allowed to offer consumers and small businesses this choice and flexibility under our existing contracts,” Verizon said in a statement to Business Insider.

The packages can also be used as standalone or in tandem with internet and phone service, similar to traditional double or triple play packages offered my most providers. They have not replaced the standard FIOS Extreme HD, Preferred HD or Ultimate HD packages already being offered to customers.

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