Since Comcast’s announcement last year that it was going to purchase Time Warner Cable, numerous news sites bombarded us with tale upon tale of Comcast’s horrible customer service and reminded us that both Comcast and Time Warner Cable have the worst customer satisfaction ratings of among all U.S. companies. The deal highlighted the lack of real broadband competition in America, allowing the tenor of negativity to spill over onto other pay TV and broadband providers — especially Verizon and AT&T, who continue to fight the FCC’s new net neutrality rules while taking lumps in the press and getting called out as hypocrites.
Three weeks ago, our long national nightmare ended. Comcast walked away from the Time Warner Cable deal after the FCC prepared to put the deal through procedural hell.
In the days that followed, the major pay TV and broadband providers began making small attempts to repair their horrid reputations. Comcast got the ball rolling by announcing it would launch a new gigabit internet service in Chattanooga, Tennessee — a legitimate attempt to compete in a city it sued seven years ago trying to squash the city’s municipal broadband plans. Comcast also announced a new initiative to fix its broken customer service.
However, it’s Verizon, a so-called competitor of Comcast’s, that’s looking to take the customer rage that had been laser-focused on pay TV and broadband providers and aim it elsewhere — in this case, at ESPN.
As the Comcast-TWC deal was falling apart, Verizon quietly launched a new FiOS Custom TV plan that featured a base package of 35 channels and seven genre-specific “channel packs” designed to appeal to different tastes. All of the sports channels, including ESPN and ESPN2, were separated into a sports-specific channel pack.
It took ESPN and Fox Sports all of two days to claim Verizon was violating its contracts with them by pulling their sports channels out of the base package. Verizon’s response was to court public opinion in their favor:
“Consumers have spoken loud and clear that they want choice, and the industry should be focused on giving consumers what they want. We are well within our rights under our agreements to offer our customers these choices.”
ESPN, clearly unmoved by this argument, sued Verizon a week later.
Let’s be clear about one thing — this lawsuit ultimately comes down to the language in the contract. If the contract specifically states that Verizon cannot push ESPN and ESPN2 out the base package and into a sports-specific bundle, then Verizon will lose, and all their bluster about what consumers want won’t mean squat to the judge.
Winning this lawsuit, however, might not be Verizon’s true intent. It could be that Verizon’s ultimate goal is to change the conversation about pay TV. By letting itself get sued and putting up the appearance of fighting for consumers, Verizon is attempting to paint ESPN, not the pay TV providers, as the primary culprit behind your skyrocketing cable bill.
Let’s not pretend they don’t have a point. We’ve covered at length how ESPN collects roughly $6.50 a month from tens of millions of pay TV subscribers who don’t watch sports. A recent Reuters/Ipsos poll goes a step further, revealing that 54 percent of U.S. adults don’t want ESPN in their TV bundle. Some of those adults have already figured out how to stop paying for it; ESPN and ESPN2 have both lost 6 million subscribers since 2011. Still, those two channels are in more than 94 million homes. ESPN’s business model continues to be predicated on collecting hundreds of millions per month from non-sports fans.
Meanwhile, ESPN could counter that it can demand such huge carriage fees because sports programming generates huge TV ratings. ESPN currently has the 20 highest-rated cable TV shows of all time — all of which, incidentally, were pro and college football games. It can also argue that sports programming is event programming that cannot be easily recorded and watched later, which increases ESPN’s overall value to subscribers.
Still, ESPN president John Skipper can’t help but sound just a bit disingenuous about the whole thing:
“I’m not passing (higher carriage fees) on to you. I’m passing them on to Comcast. It’s up to them if they want to pass it on to you.”
Which, of course, they do, because they have shareholders who demand profits, too. Pay TV providers give in to ESPN’s carriage fee demands because, well, 46 percent of their customers do want ESPN, and dropping ESPN means losing a lot of customers. Keeping ESPN, however, means everyone gets upset about the rising cost of TV.
So here comes Verizon looking to offer their customers a better way, and why not? That Reuters/Ipsos poll also revealed that 77 percent of American adults want “a la carte” pricing for TV. Why not let subscribers decide if they really want ESPN or not?
Because ESPN knows what would happen if customers did have that option — at least half of its monthly carriage fee income disappears. That’s more than $300 million per month. Given that ESPN is on the hook for $4.72 billion in rights fees this year — a number that will rise sharply in two years when the new NBA TV deal begins — it’s no wonder that the Worldwide Leader in Sports would go to great lengths to stay in everyone’s base channel package. ESPN spent decades trying to preserve the cable bundle; it doesn’t intend to stop now, no matter what any polls about customer wants suggest.
Thus, Verizon has trapped ESPN in a no-win situation. ESPN has to sue to protect its interests, but victory in court only serves to deflect consumers’ anger over skyrocketing TV bills away from Verizon — and by dint, other pay TV providers — and frame ESPN as the money-grubbing bully. Verizon is attempting to change the conversation about pay TV, and to some extent, it’s already working. All that remains to be seen is how much damage ESPN’s reputation suffers as a result.