Is this the beginning of the end of overpriced sports? We knew this day was coming. As the cord cutting increases at a staggering rate the telecommunication companies have been scrambling for a way to stay relevant, or at worst profitable. The dvr bubble that has allowed sports to reap billions because they were the only thing people were still watching live, was someday coming to an end once the distribution method could be corrected. The more and more people cut the cord means the less carriage fees can be collected, which is the lifeblood of low rated or regional sports channels unwanted by an overwhelming majority of subscribers.
A couple of month’s ago Dish Network launched Sling TV that was a bare bones version of your typical bloated cable package but still had anchors like Food Network, CNN and of course carriage rate champion ESPN. The only problem was it had a bunch of drawbacks, notably some channels like ESPN couldn’t be paused, rewound or recorded because of restrictions. This basically wasn’t giving you less channels for less money, what the consumer is demanding, but less functionality too. The deal loses a lot of value when not only are you getting a handful of channels, but they lack basic functions anybody living in the last 10-15 years have become accustomed to.
So in comes Verizon with their new “Custom Fios” plan which gives you 35 basic channels with all the functionality for a not cheap, but reasonable rate of $55 a month. But… this is the kicker. The startling thing about this package is the core channels do not include ESPN. Along with the basic 35 channels that include AMC, CNN, Food Network and HGTV, you also get to choose any two additional categories from as follows:
Did you get that last one? Sports Plus. Take a look at this lineup a little closer:
Not only do you have to choose one sports package, but you have to choose two. I realize the audience I am writing for is probably like “sure, who wouldn’t get both?”, but the reality is a lot of people won’t even get the first sports package.
Make no mistake, this is a big deal for the costs of sports going forward. It may not be felt for years, but this is the first shot taken. For the first time people are getting a chance to keep television on a major carrier, but not have to have ESPN to do it. The financials of the deal have not been disclosed so it is unknown if all the channels get paid regardless which are chosen, but that is missing the point. This is the first time a company will see how many people would choose sports, but more importantly ESPN. You have to say yes, I want ESPN over Comedy Central, Fox News, CNBC, USA, TBS, TNT, Lifetime, MTV, E!, Cartoon, Nick, Disney, Animal, etc. This is in stark contrast to automatically receiving it and their recent past of demanding top dollar/tier placement for whatever unwanted regional channel they cooked up next.
We have all known that the dvr bubble would burst and this just another pin prick but I never predicted that the giants would turn on each other so quickly. This is as much about offering a cheaper alternative for the masses as it is about opposition research. If they can go to the table with ESPN and say 20% of our customers choose your channel and less than 5% choose your regional channels when put up against channels we are paying pennies for, it could create a seismic shift in how sports are valued or even how much they are needed to be in the basic tier. On the other hand, it could backfire if 90% choose ESPN which would give ESPN an even stronger position to negotiate from. My bet is it is closer to the former.
The main thing to take away from this is not that Verizon is offering a custom package, but that ESPN, along with all of its minions of channels, are now add ons. This will be very interesting to see what type of chain reaction this leads to, but it is clear that cord cutting is causing a real sense of panic among the telecommunication giants. Do I think this “Verizon Custom Fios” will stop cord cutting? Not in the slightest, but it does show that ESPN and its enormous carriage rates are no longer sacred among the giants. We are entering a brave new world.