Lifetime-Dish Dispute May Cost Both Parties

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Note: This story was revised Monday, Jan. 30, and it differs from the print edition.

With EchoStar Communications Corp. threatening to permanently drop Lifetime Television from its Dish Network satellite-television lineup as of midnight tomorrow night (Jan. 31), the two parties have resumed discussions in hopes of resolving their bitter monthlong dispute.

Talks between the two parties broke down on Sunday Jan. 22. But Lifetime Television and EchoStar each said Friday they were having ongoing conversations, as they confronted the possible repercussions of a permanent breakup: that each side could lose millions of dollars, from lost subscriptions, program licensing fees and advertising revenue.

If the brouhaha — which began on New Year’s Day — isn’t settled soon, the women’s programmer will lose roughly 8.5 million Dish subscribers from its 89.5 million base. That could cost Lifetime roughly $20 million per year in license fees and ad revenues.

EchoStar, for its part, could well see a greater number of subscriber losses each month. Citigroup last Monday estimated that independent of the Lifetime spat, EchoStar’s “churn” already would be increasing by somewhere between 0.2% and 0.3% per month, as cable operators begin adding subscribers again after years of decreases.

It won’t be easy for Lifetime to reclaim those millions of viewers, if lost.

By one measure, Lifetime’s average primetime viewership in January, when it was dropped by EchoStar, fell 14%, to 1.3 million households, compared to a year earlier, according to Nielsen Media Research. Lifetime attributes January’s decrease not just to the loss of Dish viewers, but to “seasonal” softness in viewing.

Either way, the network concedes it will likely have to issue “make-good” spots to advertisers to make up for its smaller audiences. Advertising accounted for $611 million out of Lifetime’s total revenue of $837 million in 2005, according to Kagan Research.

Lyle Schwartz, an analyst at Mediaedge:cia, said the Dish drop “will probably cause a shortfall in the ratings and is going to end up hurting them financially.’’

Beyond subscriber losses, EchoStar has already taken a hit in the wallet over Lifetime. The direct-broadcast satellite provider recently did a retransmission-consent deal with Lifetime’s corporate cousin, Hearst-Argyle Television Inc.

Previously, deals for carriage of Lifetime and the Hearst stations were tied together. But this go-around, EchoStar negotiated a separate deal with Hearst, reducing Lifetime’s leverage.

But EchoStar paid dearly for that split-off. The satellite service operator agreed to pay 45 cents a month for those subscribers who receive the local Hearst channels. That license will cost EchoStar $11 million a year, according to Bear, Stearns & Co.

As it stands, EchoStar has already permanently replaced Lifetime spinoff Lifetime Movie Network with another women’s channel, Oxygen. That move alone means a few million dollars of lost revenue a year for parent Lifetime Entertainment Services.

Last week, Lifetime president Betty Cohen said she’s rejected EchoStar’s latest proposals because “it was just more valuable for us in the long run to not sell ourselves short to a distributor who doesn’t understand our value.”

EchoStar says Lifetime — which has helped women rally on its behalf around the country — is “playing politics” and claims that the entertainment service initially sought what added up to a 76% rate increase, over the term of a contract, for Lifetime and LMN. Lifetime says it only asked for a few pennies more a month.

Estimating that the flagship Lifetime Television channel gets a monthly licensing fee of 20 cents per television subscriber, the loss of Dish Network distribution could translate to roughly $20.4 million in lost revenue for the year. According to one cable operator’s calculations, getting dropped from Dish is costing Lifetime $200,000 per day.

Lifetime plans to step up its efforts to regain Dish’s subscribers by getting them to switch to local cable systems or DirecTV Inc. The network will heavily promote programming debuting in the next few months, such as the new series Cheerleader Nation, which will remind Dish subscribers of what they’re missing, Cohen said.

“We will continue in different layers, and all sorts of different ways, to mobilize viewers to switch from Dish,” Cohen said. “I’m not going to share all of our battle tactics, [be]cause part of a battle is the element of surprise.”

Despite rallying dozens of women’s groups and lawmakers to its side, Lifetime so far has failed to force EchoStar to restore the network to Dish’s lineup. Two years ago, when Ergen had a similar contract dispute with Viacom over carrying its TV stations and cable channels, including Nickelodeon and MTV, public outcry got those dropped services back on the Dish lineup within days.

Earlier this month, Ergen claimed that losing subscribers won’t make him put Lifetime back on Dish.

“Why would we put something back up again [when] we’ve [already] lost the customers that watch it?” Ergen asked.

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