ESPN is suing Verizon in an escalating clash over how the popular sports channel is being sold in a discounted pay-TV package.
The complaint filed Monday in New Yorkís state Supreme Court alleges Verizon is breaking its contract with ESPN, owned by Walt Disney Co., by unbundling the sports channel from the main programming lineup of Verizonís FiOS TV.
The legal showdown could have ripple effects on how other pay-TV programming is packaged. Cable and satellite services are scrambling to retain subscribers as the advent of Internet video spawns new and less expensive ways to stay entertained and informed.
Verizon is allowing customers to subscribe to a bare-bones package of 35 channels for $55 per month, with the option of adding two other tiers of programming, such as a sports package that includes ESPN. The streamlined packages are meant to appeal to budget-minded consumers weary of paying for dozens of TV channels that they rarely watch.
Pay-TV providers such as Verizon are under pressure to give subscribers cheaper and more flexible choices as they face intensifying competition from Netflix, Hulu, Amazon.com and other online services that stream TV series and movies over high-speed Internet connections.
Those market forces recently prompted Time Warner Inc.ís HBO, a longtime staple in pay-TV lineups, to begin selling an Internet-only service for $15 per month.
ESPN is fighting Verizonís discounted ďcustom TVĒ package because it gives subscribers the option of bypassing the sports channel in their programming selections. That violates pay-TV requirements stipulating that ESPN be included in the main bundle of programming, according to ESPN. Despite the alleged breach of contract, ESPN hasnít pulled its channel from the sports pack that Verizon is selling as part of its discounted service.
In its statement, ESPN said it favors innovation as long as it doesnít violate existing agreements. The sports channel recently worked out a deal that enabled Dish TVís Sling service to include ESPN and ESPN2 in an Internet video service that costs about $20 per month. ESPN is included in the main programming lineup of Sling, though.
While ESPN took Verizon to court, CBS Sports Network disclosed plans to join Verizonís separate sports package beginning Friday.
ESPN is highly prized by pay-TV providers and advertisers because the channel has the rights to a variety of major professional and college sports that still command large audiences who watch the programming live instead of on DVR recordings that let viewers skip the commercials.
The sports channelís allure has established ESPN as the most expensive channel in basic pay-TV channels, based on estimates from data provider SNL Kagan. ESPN charges pay-TV distributors $6.61 per monthly subscriber compared to just $1.65 per subscriber for the second most expensive basic channel, TNT.