When T-Mobile executives sat down with their counterparts at Discovery Networks earlier this year, they made a pitch for a new streaming television service that was promised to be a “game-changer” for the industry.
Their pitch: A low-cost streaming television service that included general entertainment, lifestyle and knowledge networks without expensive news, sports and local channels that are largely to blame for the high cost of traditional cable and satellite packages on the market.
The idea intrigued Discovery’s executives, but they were initially hesitant to make a deal because T-Mobile’s streaming TV plans sounded a lot like Philo, a three-year-old budget-friendly streaming service that offers Discovery’s networks and a handful of others for $20 a month. Discovery financially backs the service as an investor.
Ultimately, Discovery was swayed to sign a deal with T-Mobile after the phone company said its marketing for the streaming service would target expensive cable TV and satellite offerings and not services like Philo. Executives were encouraged by the idea that T-Mobile’s service would bring fresh viewers to their channels. And it might also serve as a free promotional vehicle for Philo — if customers wanted more channels and features like a cloud-based DVR, they might switch away for just a few more dollars a month.
Information about Discovery’s early dealings with T-Mobile was provided on background to The Desk this week by two network executives at a company now aggrieved by what T-Mobile’s service eventually became: One that offers their channels in a cheap tier of programming while simultaneously offering news and sports channels in a costlier package that doesn’t include Discovery’s networks.
This week, Discovery top executive publicly complained about the move, accusing T-Mobile of violating its agreement to carry channels in what eventually became TVision.
“We were very surprised with how T-Mobile decided that they were going to bundle our networks, particularly because we have a clear agreement where our networks are required to be carried on all their basic tiers [streaming] offerings,” David Zaslav, Discovery’s chief executive, said in a conference call with investors on Thursday.
Last month, T-Mobile executives unveiled TVision as a low-cost online TV product that couples the best of what cable TV has to offer with the flexibility of Internet-based pricing that consumers have come to expect from cheaper streaming services.
T-Vision’s plans are split across two offerings: One called “Live,” which includes a handful of local broadcast, news and sports channels from NBC Universal, the Walt Disney Company and Fox Corporation for $40 a month, and another offering called “Vibe” that includes channels from Discovery, ViacomCBS and AMC Networks for $10 a month.
In a background conversation with The Desk on Friday, a source at T-Mobile said they felt confident their agreements with Discovery and others were solid because T-Mobile considers TVision Live and TVision Vibe to be separate streaming services. The executive said the two TVision services are comparable to Disney Plus and Hulu or DirecTV and AT&T TV — offerings that are owned by a single parent company but are ultimately different from each other.
But executives at three pay TV programmers — Discovery, NBC Universal and ViacomCBS — don’t see things they same way, viewing T-Vision as a single streaming service where channels are broken up into “packages,” similar to how they’re offered on Fubo TV or Dish Network’s Sling TV. (No one from T-Mobile or the pay TV networks agreed to put their names or titles on the record; several people spoke on condition of anonymity because they were concerned about the possibility of future litigation.)
The issue is particularly problematic for executives at ViacomCBS, a source told The Desk, because they allowed T-Mobile to carry the company’s cable networks and Showtime on TVision under the assumption that the service wouldn’t also offer local channels or sports.
“If we had known T-Mobile would eventually launch with locals and sports, we absolutely would have pushed for a deal that included carriage of CBS,” the ViacomCBS source said.
That condition likely would have forced T-Mobile to carry the ViacomCBS channels in the more-expensive T-Vision Live package while also driving up the cost from $40 a month, people familiar with the company’s plan said. It also would have made TVision Vibe less attractive to potential customers because it likely would have lacked the ViacomCBS cable networks, they said.
Executives at Discovery and ViacomCBS are also concerned with the price point of TVision Vibe, believing the relegation of their networks to a cheaper package makes their channels appear less valuable than those offered by NBC Universal, Disney and Fox.
Concerns at NBC Universal focus on a different point: The distribution of local channels. At least one source said the company’s deal with T-Mobile requires carriage of NBC and Telemundo owned-and-operated stations in T-Vision’s “basic” programming package, which the company believes extends to carriage of the channels in T-Vision Vibe. Currently, the channels are only offered in T-Vision Live. The issue was first reported on Thursday by TV marketing blog The Streamable.
Executives at NBC Universal weren’t told about the cheaper TVision Live offering during negotiations for carriage on TVision, the source said, echoing a similar charge made by sources at Discovery Networks and ViacomCBS, and suggesting T-Mobile executives weren’t fully forthcoming with their intentions about the streaming TV service.
In a statement distributed to reporters on Thursday, a T-Mobile spokesperson didn’t specifically address the concerns of the pay TV programmers but said the company felt it was abiding by its distribution agreements.
“Clearly, the TV business has a lot of pain points to solve,” the spokesperson said. “We also want to be a great partner to media companies. We are of course complying with our content agreements, and we are absolutely open to evolving our services to make them even better for consumers.”