DIS Walt Disney Co

By Shalini Ramachandran 

Verizon Communications Inc. and ESPN said they have reached a settlement in their yearlong legal dispute over how the sports network is distributed.

ESPN, which is majority-owned by Walt Disney Co., filed a lawsuit against Verizon in April 2015 over so-called "Custom TV" packages that the phone giant's FiOS unit had started selling to customers. Those packages allowed people to buy a basic set of channels, including broadcasters and some cable networks, and layer on tiers of channels in genres like sports and kids. At issue was that customers could get a basic package of channels that didn't include ESPN, which the sports network said violated its contract. ESPN had argued that while distributors have the right to exclude its networks in packages, it can't be put into a separate add-on sports tier.

Terms of the settlement weren't disclosed.

In February, Verizon revamped its base packages to include one with sports channels like ESPN and one without -- a move widely viewed as an olive branch to ESPN. A week later, court proceedings in New York Supreme Court were postponed while the companies tried to negotiate a settlement. Verizon says uptake for its skinny bundles has increased after modifying the plans.

The issue of how channels are packaged has been front and center as media companies grapple with pushback from consumers over higher cable bills and competition from streaming services like Netflix and Hulu. ESPN, the most expensive cable network, has been left out of several cheaper channel packages over the years. As more people "cut the cord" or downgrade to less-expensive plans, the Disney network has experienced subscriber losses that have caught Wall Street's attention.

Disney Chief Executive Bob Iger said in February that the company was in talks with new and existing distribution partners "to create an array of innovative new services and light packages featuring ESPN." Disney is expected to report its latest quarterly earnings results after the market closes Tuesday.

Ryan Knutson contributed to this article.

Write to Shalini Ramachandran at shalini.ramachandran@wsj.com

(END) Dow Jones Newswires

May 10, 2016 12:48 ET (16:48 GMT)

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