ESPN has to pay Dish $4.86 Million for breach of contract


ESPNAfter a day of deliberation, a federal jury gave a mixed verdict in Dish’s $152 million lawsuit against ESPN for allegedly breaching terms on a 2005 licensing deal. Dish has been awarded $4.86 million after prevailing in one of its four breach-of-contract claims. The jury said that $4.86 million was due in order to “make the satellite distributor whole.”

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.

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 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.

Specifically, Dish accused ESPN of allowing Comcast to remove packaging requirements that allowed ESPN Classic to be distributed beyond its most widely distributed tier; of allowing DirecTV, Verizon and Time Warner Cable to have lower subscription rates on ESPN Deportes; and allowing others a la carte rights on ESPNHD, ESPN Classic, ESPNU and ESPN2, noted The Hollywood Reporter.

Additionally, Dish brought a fourth breach-of-contract claim against ESPN for granting Time Warner Cable the ability to distribute its networks on the Internet without imposing a subscription fee.

Dish won only the claim over ESPN Deportes. Under its original agreement, Dish was obligated to pay a monthly subscriber fee of 35-47 cents for ESPN Deportes between 2007 and 2013, but then TWC got a deal for 8-18 cents and Verizon got a deal for 3 cents.

At trial, Dish presented ESPN as being careless when it came to looking after its contractual obligations and not promptly making most favored nation offers when they were due. Dish also showcased internal ESPN emails that calculated how licensing negotiations with other MVPDs impacted the money that was owed to Dish and how to “finesse” the obligations for financial advantage.

Dish’s current carriage deal with ESPN expires in September.

ESPN said in a statement, “We are gratified that the jury rejected all but one of Dish’s claims and all but $4.8 million of the more than $153 million in damages they were seeking.“

Dish has also put out a statement from its general counsel Stanton Dodge, saying the company would “remain vigilant in our efforts to ensure that programmers honor their contractual commitments.”

See The Hollywood Reporter story here

RBR-TVBR observation: Part of the reason Dish didn’t get all of what it wanted is ESPN’s “most favored nation” deals are hard to standardize, based on the variety of differing factors between all of the MVPDs–including local infrastructure costs, local taxes, number of subscribers and simply the cost of signal delivery.