Dish’s suit went to trial before a jury 2/11 over claims the sports empire owes it more than $152 million after breaching a contract by offering better deals to rival distributors. The lawsuit in U.S. District Court in Manhattan went to trial over terms ESPN negotiated with Dish and its competitors to distribute channels, including ESPN Classic and ESPN Deportes. The distribution deal at issue is set to expire this year, meaning the case might potentially impact talks for a future contract. Dish, controlled by billionaire founder Charlie Ergen, commonly uses lawsuits to gain leverage in these types of negotiations, Reuters reported.
With more than $8 billion a year in fees and ad sales, according to SNL Kagan, ESPN reigns as the giant of the sports network market.
In the suit, originally filed in August 2009, Dish accused ESPN of breaching a clause in their 2005 agreement that required the sports programmer to offer the same terms as it did to competitors. But ESPN made a “calculated decision” not to offer the more favorable conditions, Barry Ostrager, a lawyer for Dish at Simpson Thacher & Bartlett, told jurors.
ESPN gave lower rates for ESPN Deportes, its Spanish language channel, to Time Warner Cable Inc in 2007 and Verizon Communications Inc in 2008. Not being offered those rates caused $18.9 million in damages to Dish, Ostrager said.
Dish lawyers also contend ESPN allowed Comcast Corp in 2006 to reduce the distribution of ESPN Classic. Not being offered the same deal cost Dish $78.9 million since it was not able to reduce distribution and the fees it paid per subscriber. Had Dish known about the 2006 offer to Comcast, it would never have agreed to a deal it made in 2009 to reduce distribution of ESPN Classic in exchange for expanding distribution of ESPNU, which caused another $52 million in damages.
“That circumstance put Dish at a very substantial competitive disadvantage,” Ostrager said.
In 2012, ESPN charged cable and satellite companies an average of $5.15 per subscriber per month, which makes it the most expensive channel. SNL Kagan. said ESPN Classic, a channel central to the lawsuit, charged programmers a separate fee of 19 cents per month.
RBR-TVBR observation: Both Dish and DirecTV have been outspoken about rising sports programming fees and how they are passed on to consumers. In fact, once Dish learned about ESPN’s new NFL deal, which is costing a reported 73% more over its existing deal, which ends this year, it threatened a split. Dish wanted ESPN owner Disney to offer the sports network on a separate tier from its basic package so that non-sports fans aren’t penalized. Dish also dropped several regional New York sports channels over the years, including YES Network, MSG channels and SNY.
You can’t blame the price increases on the sports networks so much, as obviously the fees for sports rights are going up. ESPN and others have to secure those fees because sports is their bread and butter. However, passing the fees onto subscribers is going to price more and more subscribers out of the mix, given our current economy. Perhaps offering tiered solutions with no sports will pick up many disenfranchised cord-cutters.