Voom HD case between Dish, Cablevision kicks off

Fri Sep 28, 2012 7:19pm EDT

* Cablevision founder Charles Dolan to testify Monday

* Opening arguments presented on Friday

* Cablevision sues Dish for $2.4 billion

* Dish says Cablevision did not invest enough in Voom

By Liana B. Baker

Sept 28 (Reuters) - Dish Network is so "obsessed" with beating No. 1 satellite provider DirecTV that it schemed to get out of a pricey Cablevision contract when its larger rival began to offer more HD channels, an attorney for the cable company said on Friday.

In the opening arguments of a multibillion legal battle pitting Cablevision Systems Corp against Dish Network Corp in New York State Supreme Court, Cablevision attorney Orin Synder said Dish was "hell-bent" on getting out of a contract covering a high definition channel package offered by Voom HD, then a unit of Cablevision.

In the four-year-old lawsuit, Voom HD sued Dish Network for $2.4 billion in damages, alleging it violated a 15-year contract to carry HD programming, including channels devoted to Kung Fu and video games.

Dish, with fewer subscribers, was like "Burger King" to DirecTV's "McDonalds" and did whatever it could to get an edge on new subscribers, including breaking the contract with Cablevision, Snyder said.

"Why pay for Voom when you can get more established channels at no cost?" he added.

Dish carried the Voom channels for two years, but HD content became cheaper and more widely available for popular channels such as ESPN. Meanwhile, Dish rival DirecTV increased the number of HD channels it carried and slashed the cost for its customers, making Dish desperate to get out of its expensive agreement with Voom.

The Voom HD channels are a holdover from a unsuccessful attempt by Cablevision to launch its own satellite TV service in 2003 to compete with Dish Network - then known as EchoStar Communications Corp - and DirecTV. The money-losing service failed to attract subscribers and was shut down in 2005.

The main champion of Cablevision's satellite venture was Charles Dolan, a cable industry pioneer and billionaire who founded the cable television company and Time Warner's HBO. The 86-year-old Dolan will be the first witness for Cablevision and will testify on Monday morning.

Other witnesses include James Dolan, the chief executive of Cablevision and owner of the New York Knicks basketball team, and Josh Sapan, CEO of AMC Networks Inc. Charles Ergen, the founder chairman of Dish, will testify on its behalf.

Dish attorney James Bennett argued the company, then known as EchoStar, ended the agreement because Cablevision did not fulfill a requirement of the contract that Voom HD spend at least $100 million a year on the service in the first five years of the deal. It said Cablevision only spent about $60 million on programming in 2006, while the rest went to overhead.

A key question the jurors will have to answer is whether Cablevision spent that amount and what the term "service" means. Dish said it refers to programming costs, while Cablevision said it refers to the entire Voom HD business, including marketing and overhead.

Voom HD is now a part of AMC Networks, which Cablevision spun out last year, meaning that the long dispute could also have repercussions for the company responsible for bringing viewers critically acclaimed shows such as "Mad Men" and "Breaking Bad." Dish Network blocked out AMC Networks from its 14 million customers in July and analysts have said the outcome of the trial could decide whether Dish ever carries the channels again.

The trial is expected to last a month. The case is Voom HD Holdings v. EchoStar Satellite, New York State Supreme Court, New York County, No. 600292/2008.