Verizon Communications Inc (NYSE:VZ) is behaving in a manner that leaves no doubt about its desire to promote a trend that could completely disorient cable television industry. Through its FiOS service, the wireless carrier is offering a slimmed television package known as Custom TV. However, Verizon is already facing widespread opposition from cable companies and content creators over its Custom TV, which essentially makes sports networks optional.
In many ways, the idea behind Custom TV appears the same as that of the emerging streaming TV services where subscribers pay for what they want to watch. Verizon’s Custom TV comes with a core offering of 45 channels that cost $55 a month and there is the option to add more channels at the cost of $10 each. In stark departure from traditional cable TV offering, Custom puts sports among the optional channel choices. Cable companies make sports networks a mandatory package.
Forced sports offering has been a lucrative deal for many cable providers and Verizon looks set to upset its peers with its slim offering.
Walt Disney objection
There is already tension among cable providers and content creators over the issue of unbundling sports. Walt Disney Co (NYSE:DIS) instituted a legal channel against Verizon Communications Inc (NYSE:VZ) in a New York court, claiming that Verizon was violating some terms of their existing contract by making sports and optional pick in Custom TV. With the slimmed TV offering spearheaded by Verizon on the cable front, Walt Disney obviously has the most to lose given that its ESPN imposes the highest charge on cable providers for its sports content.
To protest Verizon’s unorthodox TV offering, TV and radio stations affiliated to Disney have stopped running ads promoting Custom TV. A number of other TV content providers including Fox Sports and NBC Sports Network have also attacked Custom TV, saying that their agreement with Verizon doesn’t allow the company to tweak TV offering has it has done with Custom TV.
Custom TV termed dangerous for cable business
Analysts are predicting potential loss of billions of dollars in revenue for Disney and other sports content providers if Verizon Communications Inc (NYSE:VZ) wins with its slim TV strategy. What has been happening is that companies like Disney have been able to take advantage of their popular sports offering to bolster their other businesses that are less popular. With services like Custom TV that make sports optional, the deal may fail, which explains the protest from Walt Disney and others.
