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Dish Expected to Settle Voom Dispute, Analysts Say

11 Jul, 2012 By: Erik Gruenwedel

Dish Network is expected settle a long-running legal dispute with Rainbow HD Holdings, the AMC Networks subsidiary formerly called Voom HD, according to analysts’ reports.

The No. 2 satellite TV operator (behind DirecTV) faces a Sept. 18 New York Supreme Court date regarding allegations it breached a 2005 affiliation agreement to carry Voom HD — a 15-year deal that called for Dish to pay $3.25 per HD subscriber annually to Rainbow. The latter, in turn, pledged to spend a minimum of $100 million in content and related costs.

Dish dropped Voom in 2008 claiming Rainbow reneged on its spending commitments, which Rainbow disputed and resulted in a lawsuit. With the $3.25 per HD sub fee rising to $6.43 over the course of the 15-year agreement, Dish could face paying Rainbow more than $6 billion in lost subscription revenue on top of legal fees. The case has wended its way through the courts, including appeals.

BTIG Research analyst Richard Greenfield believes Dish is in a weak legal position heading to trial and would be wise to settle.

“While Dish has a history of prolonging legal action through repeated appeals (see TiVo), we believe a far more likely scenario is a settlement before year-end 2012 and maybe even before the trial begins that not only settles the outstanding VOOM litigation (for a sum of far less than the billions that are at risk) and which restores the AMC on Dish via a new long-term distribution agreement,” Greenfield wrote in a July 11 blog.

Craig Moffett, analyst with Sanford Bernstein in New York, concurred, saying in a note that Dish faced a harder appeals process than it did with TiVo — a protracted legal dispute it eventually lost.

“Cases involving spoliation of evidence rairely go to trial because the odds are so skewed against the offending [Dish] party,” Moffet wrote in a July 11 note.

Meanwhile, Dish earlier this year dropped AMC Networks — which has programming that includes “Mad Men,” “The Walking Dead” and “Breaking Bad,” among others — due to escalating renewal costs. AMC also includes IFC, WEtv and Sundance.

The satellite TV operator Dish said internal data showed that Dish’s subscriber base is largely indifferent to AMC programming, with the exception of the aforementioned programs.

Indeed, all back seasons of “Mad Men” are available exclusively on Netflix, as are prior episodes of “Breaking Bad.” It has been widely speculated that streaming availability of the entire catalog of “Mad Men” episodes on Netflix for $7.99 monthly helped spike record viewer interest when the Lionsgate-produced series returned followed an extended hiatus.

Dish chairman Charlie Ergen in May said programmers continue to devalue their content by making it available on multiple outlets, including subscription video-on-demand.

“It's been devalued because you can get it multiple ways and customers are asking for more flexibility or have more flexibility to get the programming, so it's not quite the same [as] if something was exclusive,” Ergen said.

AMC claims Dish dropped its programming due to an ongoing legal dispute over its subsidiary Voom HD.

“Within days of the denial of Dish’s final avenue of pre-trial appeal in the Voom dispute, Dish informed AMC Networks of its intention to drop its award-winning networks,” AMC said in a statement.

Ergen said it was an opportunity to make a good business judgment call.

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