| NEW YORK
NEW YORK Feb 11 Dish Network Corp went
to trial against ESPN Inc on Monday over claims the sports
programmer 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 pits the No.
2 U.S. satellite company against the sports affiliate of media
group Walt Disney Co.
Adding another wrinkle, 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, analysts said.
With more than $8 billion a year in fees and ad sales,
according to research firm SNL Kagan, ESPN reigns as the giant
of the sports network market.
In 2012, it charged cable and satellite companies an average
of $5.15 per subscriber per month, which makes it the most
expensive channel, according to SNL Kagan. The research firm
said ESPN Classic, a channel central to the lawsuit, charged
programmers a separate fee of 19 cents per month.
Dish and its larger satellite rival DirecTV have
been vocal about rising sports programming fees and how the cost
is passed on to consumers.
The lawsuit that went to trial before a jury on Monday
centers on terms ESPN negotiated with Dish and its competitors
to distribute channels, including ESPN Classic, which shows game
reruns, and ESPN Deportes, a Spanish language channel.
In the lawsuit, 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
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
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
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
"That circumstance put Dish at a very substantial
competitive disadvantage," Ostrager said.
But Diane Sullivan, a lawyer for ESPN at Weil, Gotshal &
Manges, said Dish was trying to "cherry pick" good terms from
rivals' deals without taking on the additional obligations they
"The evidence is going to show Dish doesn't want a fair
deal, it wants a better deal than all the other distributors,"
Dish is not the only distributor with a contract clause
requiring equal treatment, known as a most favored nation
clause, Sullivan said. She added ESPN has a "rigorous"
compliance program to ensure it follows the terms of those
This is the second time in two years the companies have gone
to trial over their carriage agreement.
In the earlier lawsuit, filed in 2008 in New York state
court, Dish accused ESPN and several Disney subsidiaries of not
providing certain high-definition channel feeds, including ESPN
News and Disney Channel.
A jury found for ESPN and Disney in 2011 and said they were
entitled to keep $56 million in fees. Dish is appealing.
A state judge separately found Dish owed ESPN and Disney $66
million in interest as the result of late payments under the
licensing agreements, a ruling upheld on appeal.
The case is Dish Network LLC v. ESPN Inc., et al., U.S.
District Court, Southern District of New York, 09-06875.