Roger Yu

USA TODAY

ESPN and Verizon Communications said Tuesday that they have reached a settlement in their lawsuit over Verizon’s “skinny bundle” TV initiative, clearing a path for pay-TV providers to experiment with new ways of selling TV channels.

The companies didn’t disclose the terms of the settlement. Verizon, which markets its pay-TV service under the FiOS brand, said it hasn’t changed its bundles and will continue to sell them.

"ESPN is an important partner of ours," said Terry Denson, Verizon's vice president of content strategy and acquisition. "We look forward to further collaborating with them to deliver customers content across all of our platforms."

About a year ago, Verizon started selling new plans that allowed customers to select a base package of channels -- including local broadcast stations, HGTV, CNN, Food Network and other popular cable networks – and options to add more channels based on genres for additional fees. ESPN was conspicuously excluded from the base channel package. While Verizon's program was hardly the "a la carte" channel packaging model advocated by some consumers, the company said it was simply responding to customers who want more flexibility in subscribing only to the channels they watch.

Cable networks predictably cried foul. ESPN, which is owned by Walt Disney, sued Verizon in New York, claiming the program violated its contractual terms. Industry analysts saw it as a move by Verizon to test the market strength of -- and customer demand for -- some of the channels, particularly ESPN, that extract high per-subscriber fees from pay-TV providers. ESPN is the most expensive channel for cable and satellite companies, collecting nearly $7 per subscriber.

Verizon's program was revised in February, and now comes with a choice of two plans, each costing $65 per month. The “Essentials” package has the most popular channels, including CNN, HGTV, AMC and Food Network, but no sports networks. The “Sports & More” package contains sports channels, including regional sports networks, but is missing a few non-sports channels, such as E!, BET, Bravo, Fox News, History, Lifetime and National Geographic. Customers can add additional channel packs for $6 each.

ESPN's row with Verizon over TV bundles is far from over

The settlement was announced just a few hours before Disney released its quarterly earnings. Concerns over ESPN's programming costs and a declining subscriber base contributed to Disney's sinking stock price for much of last year. And its legal fight with Verizon underscored lingering questions about the sports network's influence amid the changing landscape in pay-TV distribution and streaming technology.

But in February. Disney's CEO, Bob Iger, said ESPN was seeing an uptick in viewership, assuaging investors and telegraphing his intention to continue to work with pay-TV distributors for new ways of packaging Disney's channels, including lighter bundles.

Disney's shares have risen 17% in the last three months. The stock ended Tuesday 1.3% higher to $106.65.

"We have a long-standing relationship with Verizon," said Sean Breen, a senior vice president of Disney and ESPN Media Networks. "We look forward to working with them to provide great content to consumers for years to come."