Dish sues ESPN for $150M over alleged licensing terms

ESPN Accused in Dish Case of Giving Comcast Better Terms
Dish Network Corp. is headed to court seeking $150 million from Walt Disney Co.’s ESPN for allegedly breaching a contract by offering competitors including Comcast Corp. better licensing terms for sports programming.

Dish, the third largest pay-TV provider, sued ESPN in 2009 for violating a so-called most-favored-nation clause in their distribution agreement, which it said requires the sports network to offer Dish the same terms it offers a competitor. A jury trial is set to begin today in Manhattan federal court.

ESPN argued in a court filing that it eventually granted Dish the terms offered to competitors. U.S. District Judge John Koeltl denied a motion for judgment without a trial in April 2011, saying it was up to a jury to decide whether the terms were similar.

“All contracts are confidential and for most-favored- nation, it’s difficult to maintain compliance,” Aditi Bagchi, a professor of contract law at Fordham University Law School in New York, said in a phone interview. “Suing is a way to extract information. Dish can claim the contract’s been violated and force some information out of ESPN.”

TV distributors pay ESPN and other cable programmers fees based on ratings and the number of subscribers. According to the media research firm SNL Kagan, ESPN charges TV providers about $5.13 a month per subscriber on average, one of the highest rates in the industry.

DirecTV Deal
In court papers, Englewood, Colorado-based Dish listed various deals it said were offered only to competitors. Dish said ESPN allowed DirecTV, the second largest pay-TV provider and a rival in the satellite-TV business, to move the sports documentary network ESPN Classic to a less-populated tier of subscribers, which would result in lower payments. ESPN also let DirecTV pay a lower rate per subscriber for the Spanish-language network ESPN Deportes, Dish said.

Dish claimed that ESPN offered Comcast, the largest pay-TV company, the right to distribute the college sports network ESPNU to bars and taverns on better terms than it got.

Distribution Agreement
Dish and ESPN signed an eight-year distribution agreement in 2005. Dish said in its complaint that it learned from press releases and news reports in 2009 that ESPN had made deals with Comcast and DirecTV that “contain more favorable provisions than ESPN has given to Dish.” In June 2009, Dish sent a letter to ESPN demanding the same terms and claimed that ESPN failed to offer them.

Since the lawsuit was filed, Dish has said that ESPN also made more favorable agreements with the TV distributors Time Warner Cable Inc., Verizon Communications Inc. and AT&T Inc. None of Dish’s competitors are named as defendants in the suit.

ESPN is 80 percent owned by Burbank, California-based Disney and 20 percent by New York-based Hearst Corp.

The case is Dish Network LLC v. ESPN Inc., 09-06875, U.S. District Court, Southern District of New York (Manhattan).

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