According to NBC News, Verizon Fios has 4.5 million U.S. TV subscribers and 6 million broadband subscribers in the northeastern and Mid-Atlantic regions. Disney is the majority owner of the ESPN networks along with various Disney-branded channels and ABC affiliates in New York City and Philadelphia. All of those channels would go dark on Fios lineups if an agreement is not hammered out.
The two sides have begun public-relations offenses ahead of the looming deadline, with WABC in New York running a scroll along the bottom of the screen warning Fios subscribers that they could miss out on that channel’s programming.
Verizon, meanwhile, sent an email to subscribers explaining its stance on the issue, specifically mentioning the impending debut of the ESPN-owned ACC Network in August 2019.
“Disney is currently proposing that Verizon pay hundreds of millions of dollars more for its programming, despite the fact that many of its key networks are experiencing declining viewership,” the email states. “In addition to the proposed rate increase, Disney is also demanding we include, and pay for, another regional sports channel, the ACC Network, in order to continue bringing you all the other Disney and ESPN networks we do today. The rising cost of programming is the biggest factor in higher TV bills and we are standing up to networks like Disney, refusing to accept these huge increases.”
Cable subscribers pay $8.14 a month for ESPN, according to an SNL Kagan estimate cited by NBC News, making it the most expensive channel for distributors. When factoring in ESPN2, ESPNU and the SEC Network, subscribers pay north of $9 per month whether they watch the networks or not, Business Insider reported in 2017.
In 2015, Verizon tried to offer its Fios subscribers a cheaper, “skinny bundle” that gave them the option of leaving out the ESPN networks. Disney sued Verizon and refused to air its advertising, saying the offering was a violation of their contractual agreement. The two sides settled the lawsuit in 2016 after Verizon began offering a skinny bundle that included the ESPN networks.
Lurking in the background of the latest dispute between the companies is the fact that ESPN began offering its stand-alone streaming service, ESPN+, in April. For $5 a month, subscribers gain access to a number of sporting events not televised by the main ESPN networks (only ESPN cable subscribers get online access to the major sporting events televised by the networks). Disney also will launch its Disney+ stand-alone streaming service in 2019, offering movies and shows that previously were on Netflix, and is soon to become the majority owner of Hulu, which will broadcast more adult Disney and Fox programming. In essence, it is attempting to sell its products direct to consumers without a third-party cable or satellite middleman in anticipation of further cord-cutting.
That declining cable subscriber base has hurt the Disney/ESPN bottom line (though both are still extremely profitable). ESPN has gone through multiple rounds of layoffs in recent years, job cuts attributed to its shrinking subscriber base. In November, the Hollywood Reporter noted that ESPN is now down to 86 million subscribers, 2 million fewer than just a year earlier and 13 million fewer than in 2013.
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