A second programmer has gone to court against Charter Communications and the cable company’s contention that its $78.7 billion purchase of Time Warner Cable wasn’t really a purchase at all.
Fox News Channel filed suit in New York State Supreme Court in Manhattan last week, claiming Charter is guilty of fraud and breach of contract after the cable operator insisted that its affiliate fee deal with the channel should go under a lower-fee agreement made with Time Warner Cable, instead of its higher-rate Charter pact. The distinction is important because Charter could stand to save millions of dollars in programming fees if the court favors the MSO’s interpretation.
Charter said that instead of it buying TWC, as most had believed when the deal was announced, TWC, through a separate unit called Spectrum Management Holding Co. LLC, purchased Charter.
On July 8, Spanish-language broadcaster Univision filed a similar suit in New York, claiming that Charter was trying to pay for carriage of its networks under TWC’s lower rate.
“We have contracts with Univision and Fox News and expect them to honor them,” Charter spokesman Justin Venech said in a statement.
The lawsuit also comes at a tumultuous time for Fox News Channel. One of the priciest networks in pay TV — according to SNL Kagan, it attracts affiliate fees of about $1.41 per subscriber per month — FNC is undergoing a management shakeup with the sudden departure of its chairman and chief architect, Roger Ailes, who resigned last Thursday amid a cloud of allegations that he sexually harassed several female employees at Fox over the years.
Ailes will be replaced in the interim by 21st Century Fox executive chairman Rupert Murdoch until a replacement is named. Some top internal candidates include FNC senior executive vice president Bill Shine, executive vice president of news and editorial Jay Wallace and EVP and executive editor John Moody.
In the meantime, FNC continues to lock horns with Charter over rates.
When Charter announced the TWC deal in 2015, it identified about $800 million in overall cost synergies as a result of the union. About half of those synergies — $400 million — were to come from programming cost savings.
Despite its stance on the matter, Charter appears to realize its characterization of the merger can be confusing. In a letter to FNC filed with the court, Charter executive vice president, general counsel and corporate secretary Richard Dykhouse wrote that the company appreciates that “as publicly reported, the transactions were not self-explanatory.”
Just how this all plays out could have a huge impact on the fees Charter pays, according to analysts.
“If these claims by programmers are validated by the court, it could result in [about] 17.4 million subs paying the Charter rate card instead of [about] 4.4 million legacy subs benefitting from the TWC rate card,” Barclays Capital media analyst Kannan Venkateshwar said in a client note. “In other words, instead of programming synergies, programming costs would actually step up if the court rules against Charter in these disputes.”