Lifetime Falls Out of 'Favor'
DirecTV Sues Over Carriage Terms, Promotional Effort
By Linda Moss -- Multichannel News, 3/26/2006 7:00:00 PM
DirecTV Inc. is suing Lifetime Television, charging that the programmer violated the parties' carriage deal and reneged on an offer to pay Dish Network customers $200 each to switch to DirecTV during the period when EchoStar Communications Corp. dropped the women's network in a much-publicized dispute.
DirecTV, the biggest direct-broadcast satellite provider, filed suit last week charging Lifetime Entertainment Services with breach of contract, asking for the right to terminate its carriage deal with the programmer. The action, which also seeks compensatory damages, was filed in U.S. District Court in Los Angeles.
DIRECTV FEELS 'USED'
“They used us when it was it was beneficial to them, and they screwed us when they no longer needed us,” said Dan Fawcett, DirecTV's executive vice president of programming acquisition. “We're sort of disappointed at Lifetime's failure to live up to commitments under two contracts with us.”
When asked for a response to the suit, Lifetime publicity director Gary Morgenstein said, “We don't comment on pending litigation.”
When Lifetime settled its dispute with EchoStar earlier this year, DirecTV alleges, the programmer violated a so-called most-favored nations clause in its affiliation agreement, dated Jan. 8, 2005.
DirecTV claims that Dish Network now is paying a lower “net effective rate,” or price, to carry Lifetime than DirecTV enjoys, given terms of the new pact Dish and Lifetime forged earlier this year.
The lawsuit also charges that Lifetime pulled back and rescinded an offer sent via e-mail to 30,000 Dish Network subscribers, offering to send them a $200 check if they switched to DirecTV's service. To receive the offer, according to the suit, Dish customers would have to order and activate their DirecTV service by March 31.
In total, 142 Dish Network customers switched to DirecTV before Lifetime yanked the offer, according to DirecTV. They apparently did receive their $200 checks.
Dish Network dropped Lifetime and Lifetime Movie Network Jan. 1, when both sides couldn't come to terms on a contract renewal. Both networks were off Dish for about a month before Lifetime and EchoStar reached a new deal Jan. 31 and the channels were restored.
When Lifetime and Dish Network reached their new agreement, the programmer assured DirecTV that it would still honor its $200 offer to Dish subscribers who switched, according to the suit.
Instead, on Feb. 3, Lifetime sent a retraction e-mail to each person who had received the offer, according to the lawsuit, saying the switch would have had to be made by Feb. 3, not March 31.
As for the most-favored nations clause, the suit indicates that Dish Network ultimately wound up more favored than DirecTV, after Lifetime completed the renegotiation of its carriage contract with EchoStar, which owns Dish.
That deal is not straightforward. Lifetime and its corporate cousin, Hearst-Argyle Television, typically negotiate with distributors such as DirecTV or Dish by doing deals that cover both the carriage of the Lifetime programming networks and retransmission of over-the-air content from Hearst-Argyle's broadcast TV stations.
But in this year's Dish-Lifetime dispute, Hearst-Argyle first cut its own deal with EchoStar. The deal called for the Denver-based satellite service to pay $11 million for consent to retransmit the Hearst-Argyle stations.
RETRANSMISSION AT ISSUE
But, in the end, Lifetime's contract renewal with Dish Network wound up being bound to retransmission of the Hearst-Argyle stations' broadcast signals. Dish is to pay Lifetime for its programming and to carry the Hearst-Argyle stations. Then Lifetime, in turn, is to reimburse Hearst-Argyle $11 million for the carriage of its stations' content, the suit says.
Lifetime's reimbursement to Hearst-Argyle “constitutes in essence a rebate or discount” and “results in a lower 'net effective rate,'” for Dish Network for Lifetime's programming than DirecTV is paying under its current contract, according to the suit.
The actual comparable rates are not calculated or otherwise disclosed in the suit.
DirecTV is one of Lifetime's biggest distributors, carrying Lifetime, Lifetime Movie Network and Lifetime Real Women on various tiers, providing the programmer with 35 million to 40 million subscribers, all told, according to Fawcett.
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