Dish Vs. ESPN Moving Toward Finish Line
Dish Network’s case charging ESPN with multiple breaches of a 2005 carriage agreement will move to closing arguments Wednesday. But no matter who wins, what will be the long-term impact? Will the matter affect negotiations between the two sides on a new carriage deal as their current one is scheduled to expire in September?
ESPN might have its lawyers peruse the contract more than usual before it is signed. While the apparent $152 million Dish is seeking in federal court now is significant, it's small enough to possibly only cover two months worth of payments to ESPN. The new contract will probably be worth billions of dollars to ESPN.
Making the bargaining a bit more intriguing is what role Dish’s AutoHop might play. ESPN parent Disney has been signing lengthy affiliate deals with distributors covering not just ESPN properties, but others linked with ABC. And ABC is suing Dish looking to abolish the device that allows for automatic ad-skipping.
In court Tuesday as the case moved toward the finish line, Tasneem Chipty -- managing partner at the Analysis Group -- continued her testimony as an expert employed by Dish, trying to establish that the satellite operator is entitled to tens of millions of dollars in damages. (Her firm has been paid $250,000 for its work, she said.)
Dish has made multiple claims in the case that has roots in 2005. Listening to Chipty, it appears Dish is seeking $79 million on charges ESPN violated “most favored nation” (MFN) obligations regarding Dish’s carriage of ESPN Classic. Similarly, she indicated there is a $19 million claim on ESPN violating MFN provisions regarding ESPN Deportes. And she indicated there is a $54 million claim, as Dish was hurt in conjunction with a 2009 “swap” 2009 deal regarding ESPNU and ESPN Classic.
With ESPN Classic, Chipty had testified Monday that Dish is entitled to the compensation because ESPN failed to meet MFN obligations by not allowing Dish to move Classic to a sports tier. Dish claims Comcast was offered that right under a 2006 deal and it should have been afforded the same opportunity, which would have saved it considerable dollars.
ESPN believes there was no violation as both Dish and Comcast made Classic available to 8 million subscribers at an average rate of $0.28 per subscriber per month.
Dish says if it had been given the Comcast opportunity, it would have moved Classic to a sports tier since the channel was so thinly watched. ESPN counters that at least 1.6 million Dish subscribers watched the channel for six minutes or more a month. Dish suggests people changing channels and moving past it may have accounted for the figure.
Indeed, Nielsen data from 2009, by one metric, shows that in the 18-to-49 demo an average of 22,000 watched Classic in prime time nationwide.
While Dish contends ESPN Classic is lightly viewed, ESPN argues the network still helped Dish garner dollars from subscribers and collect ad revenue, so it had notable value. And it says Chipty did not take those revenues into account when calculating the would-be nearly $80 million in damages.
In court, ESPN attempted to show Classic’s appeal to Dish customers through a document showing how many complaints Dish expected when it eventually moved Classic to a sports tier in 2010. But Dish has said it could attribute the shift to only 16 service cancelations in the first two days.
That gets into Dish’s claim regarding the 2009 “swap,” where ultimately Dish moved ESPNU to its most widely distributed tier in exchange for rolling Classic up to a sports tier. Dish argues it should not have had to make the deal if it had been given the chance to move Classic to a sports tier in 2006. Still, ESPN presented figures showing Dish could have saved $64 million by making the switch. It also presented evidence that Dish did not want to make the "swap" -- which Comcast and DirecTV did -- for months because it was in litigation with ESPN (that was a different case).
Dish’s ESPN Deportes claim alleges that ESPN gave Time Warner Cable and Verizon more favorable terms to carry the network and should have offered Dish the same opportunity swiftly under MFN obligations.
On Tuesday, the Deportes matter brought one of the more curious occurrences in the trial. Dish executive Carolyn Crawford had previously testified that Dish was made whole by ESPN through payments covering obligations back to 2007. But Chipty, the Dish expert, said that was not the case. While Dish received better terms, it was still not compensated in parity fashion.
Over the past few weeks, 10 jurors have gotten a reasonable primer on how the affiliate relations business works in cable. Starting Wednesday, they'll put it to use.
The story has been revised to note Dish Network's expert is named Tasneem Chipty.