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Verizon CFO: We Have Contractual Right to Offer ESPN in Smaller TV Bundle

21 Apr, 2015 By: Erik Gruenwedel

Telecom eyes monetization of mobile content, data in pending OTT video service

In an industry first, Verizon April 21 formally launched FiOS Custom TV, designed to untether consumers from the traditional pay-TV channel bundle by offering more flexibility to customize content channels from a menu of choices. 

FiOS Custom TV costs $54.99 a month ($20 less than current offerings) featuring 35 basic channels and two selections from seven different genres: kids, pop culture, lifestyle, entertainment, news & info, sports and sports plus. Additional genre selections cost $10 per month each.

"This is an entirely new way to personalize TV," Tami Erwin, president of Verizon's consumer and mass business group, said in a statement. "FiOS Custom TV delivers consumers more choice and control over their TV. This package gives customers the flexibility to choose what they want and pay for just that. It's simple and personalized."

When asked on the fiscal call about reported pushback from Disney-owned ESPN regarding the sports network’s inclusion on FiOS Custom TV, Verizon CFO Fran Shammo took the high road on the contractual agreements saying the new offerings represented changing consumer demand.

“We believe we are allowed to offer these packages under our existing contracts,” Shammo said. “It’s all about consumer choice. If you look at the TV bundles today, most people on average only watch 17 channels, so this is a way to give consumers what they want on a choice basis.”

ESPN last week said Verizon’s new TV bundles would not be authorized by existing agreements with the telecom.

"Among other issues, our contracts clearly provide that neither ESPN nor ESPN2 may be distributed in a separate sports package," ESPN said in a media statement.

ESPN and ESPN2 are part of Dish Network’s Sling TV OTT video service launched in February for $20 a month. Sling also offers additional content packages priced from $5, including HBO Now at $15.

Separately, Verizon is looking to differentiate its OTT service from the competition by focusing on its telecom roots (i.e. mobility) and monetizing data required to stream content.

Shammo reiterated past statements about a summer launch of the OTT video service aimed at smartphone and tablet users. Unique to the service will be college sports, which Verizon secured in content agreements with ESPN, CBS Sports, ACC Digital Network, 120 Sports and Campus Insiders (Big 12, Mountain West, West Coast Conference, Patriot League and A-10), among others.

The unnamed OTT service would incorporate LTE multicast technology for live sports, a practice Verizon employed streaming the Super Bowl to mobile users in February.

Verizon cited a study done by the Institute for Communication Technology Management at the University of Southern California that found nearly 66% of millennials surveyed consider smartphones or tablets — not televisions — as their primary device, and they are more likely than others to engage in entertainment activities — including social sharing — on their mobile devices. The study also found a 12% increase in overall video consumption between 2013 and 2014, with 18- to 24-year-olds having the largest increase, nearly doubling the national average.

The OTT service would be separate from linear TV, including FiOS Custom TV. It intends to monetize the service through a combination of pay-per-view, monthly subscriptions, ad-supported content and data usage.

“This is all around the consumer consuming more content on their wireless handsets on the Verizon wireless network,” Shammo said.

Verizon ended the quarter with 90,000 net new FiOS video subscribers for a base of 5.7 million subs, which represented a year-over-year increase of 7.9%.

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