Mr. Shammo said that while the initial demand for the Custom TV
offering exceeded Verizon's expectations, many are choosing the
cheapest package available, opting for the basic skinny bundle and
not adding any extra channels. "I will tell you, as far as the
number of genres they take, it's less than what we had
anticipated," he said, before adding that while that will "put
pressure on the top line," down the road it will "improve
profitability from a programming perspective."
Verizon's consumer wireline revenues grew 5% in Q2 to $4.04
first introduced its A La Carte Lite bundle in April, the
company charged $54.99 per month for a suite of base networks which
included all local broadcast affiliates plus basic-cable nets like
AMC, CNN and Food Network, plus a pair of channel packs
organized by genre. For example, the entertainment pack features
big-reach channels like USA Network, TNT, FX and Discovery Channel, while the sports
pack gathered the likes of ESPN, FS1 and NBCSN.
Verizon had hoped that FiOS TV subs would add as many as two
additional channel packs for another $20 per month, although as Mr.
Shammo told investors, the majority of the skinny bundlers elected
to stay in the shallow end of the content pool.
Demand for the skinny bundles may have been more pronounced had
Verizon's Custom TV ads not been rejected by a number of networks
and cable operators. "Given the disputes we had, we were blocked
out from many content providers in advertising the product," Mr.
Shammo said. "And in New York and Philadelphia, we were unable to
advertise the Custom TV package for approximately 45 days until we
worked through that."
Mr. Shammo did not comment on Verizon's ongoing legal
entanglements with ESPN, which in late April filed suit against the
telco for alleged breach-of-contract violations related to the
bundling. It is ESPN's contention that the terms of its carriage
agreement with Verizon prohibits the carrier from offering its feed
on an optional sports tier.
"We will continue to work with ESPN and the lawsuit will take
its own course of action," he said.
Given its recent run of subscriber losses, ESPN is particularly
unwilling to let any alleged contractual violations slide.
According to Nielsen, the sports giant lost 3.2 million subs in the
course of the last year, bringing its overall reach to 92.9 million
households. Four years ago, ESPN boasted 100.1 million subs, making
it the most-distributed network on the cable dial.