Verizon Communications Inc. (NYSE:VZ)’s video distribution arm known as FiOS has come up with Custom TV, but the development is causing discomfort elsewhere to the point that it has earned the company a lawsuit. With Custom TV, Verizon seems to be reading from the same page as the Internet TV providers that are helping people to cut the cord with cable companies. Some analysts have also cited that Verizon could be up to a major battle beyond Custom TV because its actions could set in motion regulatory review of television content distribution contracts.
Custom TV is a lean television service that offers only 45 basic channels and costs $55 a month. The major tweak that Verizon Communications Inc. (NYSE:VZ) has brought into Custom TV is that subscribers are not forced to pay for sports networks as is the case with the traditional pay-TV offerings. Instead of making sports part of the core channels on Custom TV, Verizon is allowing users to part with an extra $10 if they feel they need for channels, including sports.
However, the arrangement that Verizon has provided for in Custom TV has dismayed television content creators and distributors. Particularly disturbed by the development is Walt Disney Co (NYSE:DIS), which owns ESPN, a sports network that charges distributors the highest fee per subscriber. Walt Disney is not only publicly saying that what Verizon is trying to do is wrong, but has already moved to court to challenge Custom TV.
According to Walt Disney, Verizon Communications Inc. (NYSE:VZ) is wrong in the first place by breaking their content distribution agreement. Additionally, Walt Disney claims that by launching Custom TV, Verizon is unfairly denying it its rightful benefits under their agreement. Verizon is also targeted by NBCUniversal and 21st Century Fox over its disruptive Custom TV package. However, Verizon maintains that it is within its rights to unbundle sports in Custom TV offering.
Unbundling sports is a strategy that may earn Verizon a lot of public support. It has also been cited that the dispute over the skinny television package may also trigger regulatory review of television content distribution, perhaps altering the landscape of TV content creation and distribution.
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