Univision Sues Charter Communications
09 July 2016 - 1:40AM
Dow Jones News
Hispanic media company Univision Communications Inc. is suing
Charter Communications Inc., accusing the second-largest U.S. cable
company of breaching its TV carriage contract.
Univision's suit sets up a battle with Charter as the cable
operator seeks to bargain for better programming deals after buying
Time Warner Cable.
Univision filed the lawsuit Friday in New York Supreme Court,
asking for a declaration to clarify language in its Charter and
Time Warner Cable programming contracts. Univision has alleged that
Charter is twisting certain language so that it can pay
under-market rates for the right to carry Univision's channels,
based on an old Time Warner Cable deal. Univision also sued Charter
for breach of contract.
A spokesman for Charter said, "We have a long-term contract with
Univision, and we expect them to honor it." The spokesman added
that the company hadn't seen the complaint yet.
As pay-TV distributors are bulking up, they are putting the
screws to TV channels to push back against the rise of programming
costs. Cable executives have argued that the climbing fees to carry
channels directly contribute to increases in customers' cable bills
and, by proxy, encourage cord-cutting as people seek cheaper
alternatives.
Univision said in the complaint that the suit was precipitated
by months of unsuccessful attempts to engage Charter in
negotiations before its carriage agreement expired June 30. Charter
had said it wanted to wait until its Time Warner Cable deal closed,
which happened in May. Since then, Univision said Charter was
trying to claim that the old Time Warner Cable agreement with
Univision, which allows Time Warner Cable to pay "dramatically
below current market license fees," should be the contract in place
through June 2022.
Univision said it would seek damages to compensate for the
difference. The largest Spanish-language broadcaster in the U.S.,
Univision owns a variety of 24-hour cable networks, 59 local-TV
stations and 67 radio stations.
Bigger distributors with more customers can typically leverage
their size to bargain for cheaper monthly carriage fee deals with
TV channels. Charter, for its part, has made no secret of the fact
that it expected to benefit after the merger closed from Time
Warner Cable's rates, which were more attractive because it served
more customers.
If Charter is able to elect Time Warner Cable rates without a
renegotiation, Univision would lose out on some revenue resulting
from a bump in fees that often accompanies contract renewals.
Univision said a simple transfer isn't allowed under its prior
agreement with Charter. In that contract, a "heavily negotiated
provision" said that if Charter were to buy another cable company,
the target operator's agreement would govern its systems through
the end of that calendar year. As a result, Univision argued, Time
Warner Cable's contract only should extend through the end of 2016
and should only govern old Time Warner Cable's systems, not
Charter's.
But, according to Univision's suit, Charter is arguing that it
wasn't the one that bought and now manages Time Warner Cable; it is
the other way around. Univision said Charter has created a shell
company called Spectrum Management Holding Company LLC to manage
its legacy systems that it claims is a "Time Warner Company" and
should be able to use Time Warner Cable's carriage rates.
Univision said Charter's claim counters statements Charter has
made to regulators and investors that it was the one buying and
subsequently managing Time Warner Cable.
"Quite simply, Charter promised one thing publicly in order to
secure approval for its acquisition and is now privately claiming
the exact opposite to Univision," a Univision representative
said.
It isn't uncommon for a big distributor to seek a carriage
renegotiation after an acquisition. Since its purchase of DirecTV
last year, AT&T has sought to transition rates that its small
U-Verse TV division was paying to that of the large satellite
operator. That has resulted in some hits to carriage-fee growth
expectations for media companies including Viacom Inc.
It isn't an ideal time for Univision to be having a high-profile
carriage fight. The company has filed for a potential initial
public offering this year, after having postponed because of
turbulence in the IPO marketplace and media sector. A Univision
spokeswoman declined to comment, citing the IPO quiet period.
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com
(END) Dow Jones Newswires
July 08, 2016 11:25 ET (15:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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