WASHINGTON DC – Verizon Communications Inc. said its FiOS service will offer new TV packages aimed at giving customers flexibility to purchase only certain groups of channels they want to watch, the latest sign of how pay-TV providers are adapting to stepped-up competition, the Washington Post reported Friday.
Starting April 19, consumers will be able to sign up for a slim package of TV channels that includes broadcasters such as ABC and Fox, as well as CNN, AMC, Food Network and others. They can then add on “channel packs” covering various genres, such as sports, kids, pop culture and lifestyle.
FiOS’s cheapest plan will cost $55 a month and will include two channel packs. Each additional package, which can consist of about 10 to 17 channels, will cost $10 a month. Customers will be able to switch to a different channel pack after having one for 30 days.
“Customers want flexibility to turn channels on and turn channels off,” said Tami Erwin, president of Verizon FiOS, which serves around 5 million video subscribers.
The move comes as pay-TV distributors such as Verizon are facing mounting pressure to give consumers more choice in how they buy TV, instead of requiring them to purchase a large bundle of channels, including many they don’t want.
Erwin cited Nielsen’s report last year that showed that the average number of channels Americans receive has increased over five years by 46% to 189 in 2013, but they still only watch about 17.
Underscoring the threat to pay-TV distributors, consumers are beginning to “cut the cord” in favor of more affordable online services such as Netflix Inc. and Hulu LLC.
Meanwhile, new entrants from the Web are shaking up the marketplace. Dish Network Corp.’s streaming service Sling TV, for example, allows consumers to mix and match tiers of channels on top of a $20-a-month core package. Apple Inc. is planning a TV service offering a “skinny” bundle of channels in the fall, people familiar with the situation have said.
Operators have already been slimming down their offerings to cater to cost-conscious customers. Comcast Corp., for instance, offers a skinny bundle of TV channels with HBO and fast broadband.
The plan Verizon announced isn’t a full move to “a la carte” pricing – allowing customers to pick each individual channel they want. That is a model some lawmakers and consumer groups have pushed for over the years, with media executives arguing it would wreak havoc on the industry and be worse for consumers.
The FiOS plan will relegate some of the most well-known cable TV channels to add-on tiers. ESPN, for example, is part of the sports pack, along with Fox Sports 1. Viacom Inc.’s Nickelodeon is in the kids pack. Comcast Corp.’s USA, and Time Warner Inc.’s TNT are in the entertainment pack. That raises the prospect that those networks could lose Verizon subscribers if customers don’t select the channel packs that include them.
Big channels like ESPN tend to stipulate in their contracts with distributors that they need to be in the most widely distributed tiers or reach a high percentage of the customer base. Erwin said FiOS designed the add-on packages in such a way that it “expects to be in a position of compliance” with its content contracts.
Verizon has various pricing plans for customers who bundle phone and Internet service with the new FiOS TV package. For example, for $75 a month a customer can get the base package, two channel packs and 50 megabits per second broadband speeds. For an additional $10 a month, the customer could add in phone service. A FiOS spokesman said the prices aren’t promotional ones.
