Verizon last year made waves by being the first major cable provider to start seriously offering a so-called "skinny bundle" of smaller, cheaper cable channels. To do that, Verizon pulled the biggest reason for bloated cable bills -- ESPN -- out of the core cable lineup. That immediately resulted in a lawsuit from ESPN, which claimed Verizon's move violated the companies' contract.
Speaking today on the company's earnings call, Verizon hinted at the fact it may be backing down off of its fight with ESPN and restoring the pricey channel to its core "Custom TV" lineup.
"We're going to refresh it so that we're in compliance with our contractual relationships [with programmers]," Verizon CFO Fran Shammo told attendees of the company's earnings call this week.
Shammo didn't cite ESPN specifically, but given that fight is the only one Verizon has had on the subject, it's likely Verizon lawyers don't think this is a legal fracas they can win. That means ESPN gets put back into the core Custom TV lineup, and prices will go up accordingly.
Shammo went on to note that one-third of new FiOS video customers now opt for the company's leaner Custom TV bundles, the latest example of cable TV customers looking to cut costs via "cord shaving."
This cord shaving has had a dramatic impact on ESPN, which made waves by recently revealing it has lost 7 million subscribers over just the last two years. ESPN could offer a direct-to-consumer streaming option to evolve with the times, but this same contract with Verizon lets Verizon pursue skinny bundles if ESPN does so.
As such, ESPN's caught between a rock (the need to evolve) and a hard place (the need to protect its legacy TV operations). While ESPN may win this particular battle with Verizon, longer term the stubborn refusal to offer more flexible, less expensive channel packs is a fight ESPN simply cannot win.