Verizon-ESPN dispute may pave way for a la carte pay-TV programming

[Commentary] There's a reason ESPN sicced its lawyers on Verizon, shattering any pretense of being part of a big, happy pay-TV family. Verizon's new Custom TV bundles of channels -- which break off ESPN and other sports channels into a separate package -- could signal the end of a business model that cable networks love and consumers detest. The stakes couldn't be higher. If Disney-owned ESPN prevails in court, it will ensure that the expensive sports channel will continue to be forced on subscribers who don't want it. ESPN accounts for an estimated $7 of monthly bills, more than any other channel that isn't purchased separately. If Verizon wins, it will open the door for other pay-TV companies to break up conventional programming bundles and give consumers more freedom to choose channels.

"This is a potentially watershed event," said Rich Greenfield, a media analyst with BTIG in New York. No one disputes that the pay-TV industry is undergoing radical change. Like publishing, music and other businesses in the throes of digital disruption, pay-TV companies are struggling to protect Niagara-like revenue streams as consumers demand more choice and value. Cutting the pay-TV cord was once only for the technologically savvy. Now, devices such as Roku and Apple TV have democratized streaming video. That has sparked an explosion in quality programming from subscription services including Netflix, Hulu, HBO Now and Sling TV. So Verizon's move toward smaller, cheaper, more competitive bundles makes perfect sense -- which is why it's so threatening to ESPN. Cable networks have long enjoyed guaranteed customers -- and revenue -- through contracts with pay-TV providers. In the future, they may have to peddle their wares directly to viewers, which is a lot harder. It's no surprise, then, that ESPN is fighting to protect the status quo.