October 18, 2012
Trial proceedings in AMC Networks' lawsuit against Dish Network Corp. were adjourned abruptly Wednesday morning until next Monday, shortly before Dish Chairman Charlie Ergen was due to take the witness stand to testify.The sudden adjournment, coming after lawyers for the two companies were seen meeting in a private room at the courthouse, prompted speculation among Wall Street analysts that settlement talks were under way. AMC declined to comment. Dish and AMC's sibling company Cablevision Systems Corp., which is involved in the suit, didn't respond to requests for comment.
At issue in the trial is a four-year-old lawsuit filed by AMC-owned unit Voom against Echostar Communications Corp., now known as Dish, over breach of contract relating to Voom's now-defunct suite of high-definition TV channels. Voom is claiming damages of $2.5 billion. But the two companies are also engaged in a fight over programming. Dish over the summer dropped AMC's channels from its lineup, citing high cost compared with their relatively low viewership. AMC has said that the legal dispute motivated Dish to drop its channels.
Both companies have reason to resolve the programming dispute. Dish has 14 million subscribers, about 13% of AMC's potential audience, and so AMC is missing out on a sizable chunk of its potential audience. That limits its ability to fully cash in on the popularity of some of its shows, such as "The Walking Dead." Nevertheless, the series enjoyed a 50% increase in viewership for its season premiere on Sunday night, according to Nielsen. Michael Morris, analyst at Davenport and Co., said the opening episode of "The Walking Dead" drew a bigger audience than the debut episodes of high-profile broadcast network shows in the new fall season among the 18-49 age group, excluding sports.
Dish is under pressure from subscribers to restore the AMC channel. Dish's Facebook page, for instance, has been flooded with complaints from customers unhappy that AMC isn't available. Some Dish subscribers who complain about AMC not being available have been given free Roku boxes or upgrades to Dish's new Hopper digital video recorder, in addition to $5 a month off for six months. "Pay-TV distributors are constantly evaluating, adding to and modifying our programming lineups," said Dish spokesman Bob Toevs, pointing out that Dish added a movie channel to replace AMC.
As for the trial, Dish has been on the defensive since it began last month. Last Friday, the judge granted AMC the right to hire a forensic team to examine Dish's computer hard drives for any deleted draft copies regarding a 2007 audit Dish undertook of the Voom channels. Judge Richard B. Lowe III of New York State Supreme Court, who is hearing the case, also allowed AMC to access Dish's subscriber database to verify the current number of high-definition subscribers the satellite operator has-an issue that could increase the amount of damages AMC could claim, if the jury rules its way.
Dish has "no credibility when it comes to document exchange and turning everything over," Judge Lowe said last Friday. In earlier proceedings, in November 2010, the judge ruled that the satellite provider had systematically destroyed emails relevant to the case within a reasonable period of expecting that the dispute would go to court. Some analysts continue to see a settlement as the most logical course of action for Dish, considering the setbacks it has seen in the case. "At some level, it simply isn't worth the risk for Dish to continue to flirt with disaster when a settlement is presumably out there to be had at some reasonable price," said Sanford C. Bernstein analyst Craig Moffett. Wall Street Journal
Sprint Nextel Corp. is in talks to gain control of partner Clearwire Corp.'s board via agreements with the wireless broadband operator's other investors, people familiar with the matter said. The terms and status of the talks with Clearwire investors including Craig McCaw's Eagle River Holdings LLC and Comcast Corp. weren't immediately clear, but a deal would give Sprint the ability to appoint a majority of directors and control the company without acquiring it, the people said.
Such a move would also clarify a long-dysfunctional relationship that became a central issue in Sprint's $20 billion planned acquisition by Japan's Softbank Corp. Sprint holds 48% of Clearwire but doesn't control the board, a risk given Sprint has sold service on Clearwire's network and needs access to its smaller partner's big holdings of spectrum rights. Sprint has appointed seven of Clearwire's 13 board members, but one of those appointees is independent. The arrangement, which Sprint is expected to reveal in a filing within days, could come as a disappointment to investors who had hoped Sprint would acquire Clearwire as part of its own acquisition by Softbank. But it would resolve concerns that Sprint could lose control of Clearwire's assets. And the move wouldn't preclude an acquisition of Clearwire once the Softbank deal closes, some of the people said. That deal is expected to close in six to eight months.
Softbank agreed to buy a 70% stake in Sprint in a deal announced on Monday. As a condition of the $20 billion in financing required for the deal, Softbank's lenders sought assurances that Sprint would be able to control Clearwire, people familiar with the matter said. Clearwire, a wireless broadband network operator that loses money and is carrying a heavy load of debt, holds vast reserves of spectrum that were important to Softbank, the people said. The Internet and telecom company is building a high-speed wireless network in Japan using technology similar to what Clearwire is building in the U.S., and Softbank Chief Executive Masayoshi Son alluded to the benefits of being able to use Clearwire's technology at a news conference in Tokyo announcing his acquisition of Sprint.
Sprint already has access to Clearwire's spectrum holdings and uses its network to carry some traffic for Sprint smartphones. But questions have swirled around Clearwire's financial viability. Clearwire was founded in 2003 with high hopes by Mr. McCaw, who aimed to build the first nationwide wireless network that would allow people to browse the Web on mobile phones at broadband speeds. The company got a big boost in 2008, when an unlikely alliance including Sprint, Comcast, Intel Corp. and Google Inc. announced an investment of billions of dollars in Clearwire. But it later fell behind in the race to build next-generation networks amid mounting debts and squabbles with Sprint.
Sprint's co-investors have generally lost interest in Clearwire in recent years, people close to the companies say. Comcast, for example, had bet on Clearwire as a way to sell wireless service alongside its cable and broadband Internet offerings. But Comcast last year reached a deal with Verizon Wireless to resell that carrier's cellphone service. After news of the Softbank deal was first reported, Clearwire's shares shot higher on hopes Sprint would buy its smaller partner outright. But Sprint instead was able to assure Softbank and its lenders that it would be able to control Clearwire without an acquisition, people familiar with the matter said. The press release announcing the Softbank deal specifically said the transaction with Softbank "does not require Sprint to take any actions involving Clearwire Corporation other than those set forth in agreements Sprint has previously entered into with Clearwire and certain of its shareholders." Wall Street Journal
Dish programming boss Carolyn Crawford, whose courtroom antics culminated in her nearly toppling an elderly man, will be back in court Monday - this time to apologize. Dish lawyers asked Supreme Court Judge Richard Lowe if he would allow Crawford to apologize to him, along with Cablevision's lawyer, Orin Snyder of Gibson Dunn, and his 83-year-old father, who was in court yesterday.
Crawford, who had just been dressed down by the Cablevision lawyer, tapped Synder's father on the back on her way out of the courtroom yesterday, saying sarcastically, "I hope you're proud of your son." One witness said he almost toppled over. Snyder said she "pushed" his father and asked that the police be called, according to witnesses. Crawford became emotional yesterday after the judge referred to her as "that woman," saying she shouldn't have been allowed to stay in the courtroom during the trial between Dish Network and Cablevision because she was too integral to the case.
Cablevision is suing Dish for $2.4 billion, arguing that it violated their 15-year contract when it dumped the cable operator's Voom TV service. Crawford fled from the courtroom in tears only to return to wag her finger at the judge and Cablevision's lawyer. The drama was expected to continue this morning, but lawyers were sent back to their offices to sort out various legal issues instead as the trial was adjourned until Monday. The jury was also instructed to go home and not read any press coverage of the events. New York Post
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