Settle up and move on.
That was the advice given to Dish Network (s DISH) by several high-profile media analysts Wednesday morning. The satellite company, they say, should settle its lawsuit over the failed Voom HD venture with Cablevision (s CVC) and AMC Networks (s AMCX), and it should end the related carriage dispute that has kept AMC channels off its service since July 1.
“We believe Dish is making a strategic mistake, risking billions to save $70 million per year in AMC license fees versus settling their lawsuit and agreeing to a new long-term distribution deal,” blogged BTIG Research’s Richard Greenfield.
With a jury trial set for Sept. 18, litigation over Voom is now “immient” and “no longer merely a boilerplate entry buried in SEC filings,” added Bernstein Research’s Craig Moffett.
“Cablevision and AMC enter the trial with a huge head start, having already won an adverse-inference recommendation to the jury related to Dish having destroyed documents,” Moffett added. “In essence, the jury is to begin the trial with the assumption that Dish’s destroyed records would have supported Cablevision’s claims. The odds would therefore appear to be heavily in Cablevision’s/AMC’s favor.
Also read: “Dish never even talked rates with us”
At the end of June, coinciding with the end of their carriage deal, Dish pulled AMC Networks channels AMC, WE TV and IFC off its service. The No. 3 pay TV provider with around 14 million subscribers, Dish said it was looking out for its customers, claiming AMC wanted excessively high carriage-fee increases.
For its part, AMC says that Dish never discussed carriage rates before pulling its channels. The move, most believe, is strongly tied to the ongoing Voom litigation that could prove costly for Dish to settle, and even more expensive should a jury actually be involved.
“The dollar amounts are large enough to be highly material to the valuation for all companies involved — the potential price tag is as much as $3.5 billion or more including interest,” Moffett wrote. “Proceeds in the event of a judgment would be paid by Dish Network and would be received by Cablevision and AMC Networks in an even split.”
The potential for this payout perhaps explains why AMC stock has shot up over 14 percent to $40.68 since July 2, despite the ratings and ad sales hit associated with suddenly being blacked out in nearly 14 million homes.
Dish, meanwhile, has seen its stock price drop from $32.61 in early May to under $27 Wednesday. With the fifth-season premiere of one of AMC’s tentpole series, Breaking Bad, set for Sunday (July 15), it’ll be interesting to see how much of a subscriber hit Dish takes. The company will reveal its current customer count August 8, when it releases its second-quarter earnings.
“While Dish sub losses have likely been minimal since dropping AMC, we expect the pace of disconnects to increase as key original programming returns to AMC, such as Breaking Bad this Sunday,” Greenfield noted.
Dish, he added, is “working hard” to retain upset subscribers, offering $10 discounts for three to 12 months as well as free Roku boxes and season passes to watch Breaking Bad on Amazon Instant Video.
As for the litigation, it started in 2008 when Dish pulled lightly viewed Voom HD channels off its service — channels that were programmed with high-definition shows provided by Rainbow Media Holdings, a subsidiary of Cablevision until it was spun off as the publicly traded AMC Networks last year.
Dish claimed that it didn’t violate its carriage agreement for Voom since Cablevision and Rainbow weren’t satisfying requirements for program spending.
However, Dish was dealt a significant legal setback when New York State Supreme Court Justice Richard B. Lowe ruled that the company intentionally destroyed documents related to the case.