Fox, NBCUniversal Reject Verizon’s Slimmer Pay-TV Packages

Fox Sports and NBCUniversal are rejecting Verizon Communications Inc.’s plans to offer their networks as part of smaller, cheaper pay-TV packages, claiming the service violates contract agreements.

Both programmers issued statements Tuesday saying the Verizon Custom TV package that just went on sale doesn’t comply with their contract agreements. Verizon officials said on a conference call they believe they are within their rights under their accords with the media companies.

“We reject Verizon’s view that it can pursue the new packaging scheme it announced yet still comply with our agreements,” 21st Century Fox Inc.’s sport division said in a statement. “That said, we prefer to keep our commercial discussions confidential, and we will continue to address our concerns directly and privately with Verizon.”

The dispute threatens to derail efforts by Verizon, one of the largest pay-TV providers, to offer a narrower, lower-priced service at a time when companies like Netflix Inc. are drawing viewers away from costly pay-TV bundles. Walt Disney Co.’s ESPN was the first programmer to say Verizon didn’t have the right to offer its channel in a separate sports package.

Verizon, based in New York, began selling smaller bundles of channels on Sunday in a break with the industry’s longstanding strategy of forcing customers to pay more than $80 a month for hundreds of channels, including many that few consumers watch.

Custom TV

“Verizon’s announced ‘Custom TV’ package does not comply with our existing agreement,” Cameron Blanchard, an NBCUniversal spokeswoman, said in an e-mail.

Customers of Verizon’s FiOS service can buy a basic package with a few dozen channels marketed as Custom TV, starting at $55, and add bundles of channels for sports or entertainment.

“If you look at the TV bundles today, most people only, on average, watch 17 channels, so this is a way to give consumers what they want on a choice basis,” Verizon Chief Financial Officer Fran Shammo told analysts on an earnings call Tuesday. “And we believe that we are allowed to offer these packages under our existing contracts. So we’ll leave it at that.”

The Wall Street Journal reported earlier Tuesday that Fox and Comcast Corp.’s NBCUniversal were rejecting the plan.

Before it's here, it's on the Bloomberg Terminal.