TMG Blames EchoStar for Chapter 11 Filing
Denver Ad-Sales Firm Disputes $34M Claim From Dish
By Steve Donohue -- Multichannel News, 8/7/2007 4:09:00 AM
Turner Media Group Inc., an ad-sales rep firm and programmer, is blaming EchoStar Communications for trying to shut down its business, dropping its eight networks and forcing it to file for Chapter 11 bankruptcy protection.
The Denver-based operation, known as TMG, in legal papers alleged that satellite provider EchoStar for the past eight months has been engaging in “a systematic scheme” to try to capture TMG’s “revenues, profits and assets.”
In its Chapter 11 papers, TMG also said that it plans to dispute the $24 million claim that EchoStar, its largest unsecured creditor, is seeking. There are 20 unsecured creditors with more than $27 million in claims, a group that includes not only EchoStar but Time Warner Cable Direct, DirecTV, Comcast Spotlight, Comcast Media Center and Ensequence.
TMG’s The Ad Group has been EchoStar’s ad sales rep firm since 1998, for many years selling the majority of Dish Network’s available ad inventory for 30-second spots and interactivity. Dish, which has also carried all eight of TMG’s transactional national networks, dropped them July13, as part of the ongoing dispute.
“TMG admits in its bankruptcy filing that TMG owes EchoStar, at least, $3 million dollars which they refused to pay,” EchoStar, which counts 13 million subscribers, said in a prepared statement. “It is unfortunate that TMG filed for bankruptcy, but we will vigorously pursue all of our claims to recover the monies owed to us.”
TMG filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Colorado.
Last year, TMG had $73 million in revenue and $200 million in billings, according to a declaration of Gary Turner, TMG’s president, that was filed Monday. This year, TMG “will realize only a fraction of that amount,” because EchoStar forced it into a re-negotiated contract, terminated that deal and then demanded about $23 million under the re-negotiated agreement, according to Turner’s statement.
In contrast, over the last eight years EchoStar “has been enriched” by TMG, to the tune of nearly $1 billion, according to Turner. Most recently, Turner alleged that EchoStar made a “unilateral decision to retain 100% of TMG’s advertising sales commission,” about $500,000 a month.
In his filed declaration, Turner outlined the complicated details of TMG’s problems with EchoStar. On top of is pact to handle the satellite provider’s ad sales, in 2005 TMG struck a five-year agreement with EchoStar for Dish Network to carry all eight TMG networks under a revenue-sharing agreement. TMG also agreed to have EchoStar deliver those networks to other distributors, a job that Comcast’s Digital Media Center had handled previously.
But in 2006, when TMG’s ad-rep deal was up for renewal, EchoStar demanded that TMG also amend the carriage deal for the eight networks, according to Turner. For example, EchoStar wanted to be paid an escalating license fee of 63 cents for each of TMG’s eight networks, Turner said.
“Needless to say, TMG was shocked that EchoStar would insist that these two separate agreements be tied together,” and that it sought “onerous” amendments to a five-year carriage deal that had just been signed, Turner said.
TMG’s ad-rep deal with EchoStar became non-exclusive in 2007, and Dish entered into an agreement with Google for a portion of its ad sales, although TMG continued to sell a majority of the ads.
A number of distributors, such as DirecTV and several cable networks, carry TMG’s networks.
TMG has retained the law firm Baker & Hostetler LLP as its bankruptcy counsel.
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