Commentary

ESPN-Dish Standoff Far From End Zone

With ESPN set for its annual upfront presentation on Tuesday, a lawsuit rooted in a pair of press releases issued two years ago continues its march through federal court. The releases issued at the May 2009 upfront event touted the ESPNU college sports network gaining reach through new agreements with Comcast and DirecTV.

But Dish Network was piqued and filed suit in New York federal court in August 2009. Dish charged that the two deals violated an agreement it had with ESPN.

In court papers, Dish claimed its contract with ESPN requires that when ESPN makes a deal with another operator on more favorable terms, ESPN must make a similar offer to Dish. It's known as a "most favored nations" clause.

Dish claimed the Comcast and DirecTV arrangements were on those better terms and that it was not given a chance for the same upgrade.

ESPN has denied the charges over the past two years and refused to bend.

Dish's breach of agreement suit continues and received some momentum as an ESPN motion for summary judgment was denied by federal Judge John G. Koeltl last month.

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A trial could come as early as November, but there is almost no chance there will be one. Neither side would want to risk it. And a settlement at some point will ensue.

Dish's carriage deal with ESPN for multiple networks is set to expire after 2013, so it's plausible that the current deal will be ripped up and a new one signed since the expiration is not so far away.

The federal suit, however, has prompted a remarkable string of events. All the while, offering insight into the thorny world of negotiations that take place between programmers and distributors.

At ESPN's May 2009 upfront, two releases were issued that are referred to in court papers. One, noted Comcast had agreed to offer ESPNU on its "digital classic" service. (Also, what's now ESPN3.com would be made available to Comcast broadband subscribers.)

The other release noted DirecTV would increase distribution of ESPNU by moving it to a "choice" package, while moving ESPN Classic to a lesser-distributed sports pack that comes with an extra fee.

News stories followed about the deals -- which would lift ESPNU's distribution to 46 million homes -- that Dish apparently read.

The Comcast and DirecTV deals were made as ESPN opted to engage in some horse-trading, looking to boost distribution for ESPNU, while willing to reduce the number of homes with ESPN Classic.

As that strategy progressed, Dish felt it was entitled to arrangements similar to the Comcast and DirecTV ones, under its "most favored nations" provision.

While ESPNU distribution may have sparked the 2009 federal case, Dish's accusations against ESPN have expanded over the past two years. In court papers, Dish has also lobbed charges that ESPN has violated an agreement by giving DirecTV lower rates for distribution of ESPN Deportes in Puerto Rico and the U.S. Virgin Islands.

There are Dish charges regarding distribution of ESPN networks in bars by Comcast and DirecTV on an "a la carte" basis. And, allegations that Comcast received rights to run four 30-second spots a day on ESPNU -- which Dish was not offered.

ESPN denied the Dish allegations in court papers.

However, when Judge Koeltl denied ESPN' request for summary judgment last month, his opinion offered evidence that ESPN had worked with Dish on some of the disputed matters -- and the pair even cut some new agreements.

For one, Judge Koeltl noted that in September 2009, Dish entered into a "swap agreement," where it would increase distribution of ESPNU and reduce it for ESPN Classic -- seemingly at the heart of the matter way back in 2009.

On the matter of DirecTV paying less for distribution in the Caribbean, an agreement between Dish and ESPN was reached in February 2010 satisfying both sides.

On the matter of Comcast getting four spots on ESPNU: in an April 2010 letter, the judge wrote that ESPN offered Dish the same opportunity for a lengthy period.

Part of ESPN's argument for summary judgment was based on a previous ruling in a New York State Supreme Court case, where again Dish sued ESPN. There, ESPN won summary judgment.

Where the current case goes from here is anybody's guess. ESPN and Dish executives are in the midst of depositions, but that could bring more questions than answers. That's sort of been the pattern.

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