Already a Bloomberg.com user?
Sign in with the same account.
AMC Networks Inc
DISH Network Corp
Cablevision Systems Corp
AMC Networks Inc. (AMCX) will lose as many as 18 million subscribers, almost a fifth of its audience, if it can’t reach a deal with two of the largest U.S. pay-TV services by midnight tonight.
The cable programmer behind “Breaking Bad” and “The Walking Dead” will have its channels removed by Dish Network Corp. (DISH) and AT&T Inc. (T)’s U-verse at 11:59 p.m. New York time if it can’t reach new fee agreements with the two pay-TV systems.
AMC, which operates the AMC, IFC and We TV channels, said in an e-mail it faces “separate and distinct” issues with the companies. AMC accuses Dish of “retaliation” over a lawsuit that may cost the satellite service $2.5 billion. The AT&T fight is over prices, which suggests a last-minute deal is more likely, said Brett Harriss, a Gabelli & Co. analyst.
“AT&T is a garden-variety rate dispute,” said Harriss. “The Dish situation is much more complicated. There’s going to be a lot of litigation, and maybe the AMC solution is part of a settlement.”
New York-based AMC, spun off by Cablevision Systems Corp. (CVC) last year, is party to a lawsuit that its former parent brought against Dish in 2008. Cablevision sued for breach of contract after Dish, based in Englewood, Colorado, said it would stop carrying 15 high-definition channels called Voom HD.
Cablevision invested more than $100 million a year in the project, according to court papers. The Bethpage, New York-based company expected to lose money until enough Dish customers signed up to recoup the investment. The deal called for Cablevision to receive as much as $6.43 a month for each Dish high-definition TV customer.
AMC reaches 96.3 million households, according to the company’s annual report. Dish has 14 million subscribers and U- verse has about 4 million, company reports show.
Josh Sapan, AMC chief executive officer, said last month Dish’s decision to drop the channels is “litigation motivated.” His company stands to receive 50 percent of any settlement between Dish and Cablevision over Voom, Harriss said.
Dish Chairman Charlie Ergen said last month he wants to lower bills for consumers, and taking out networks with “very, very, very low viewership,” outside of a few popular shows, is a way to keep prices down.
Shares of AMC fell 1.3 percent to $35.55 yesterday at the close in New York. Dish rose 3.6 percent to $28.55 and Cablevision gained 2.6 percent to $13.29.
AMC will lose about $90 million in profit from lost subscriber fees if the channels are gone from Dish for a year, Harriss said. Being off Dish and AT&T for a full year would result in $89 million less in AMC advertising revenue, said Harriss, who also estimates the company receives on average $0.54 cents a month per subscriber from pay-TV systems.
The company is boosting spending on original programs as it transitions from an ad-supported movie channel to one with more original shows, Harriss said. That’s motivating AMC to ask for higher affiliate fees, according to David Joyce, an analyst at Miller Tabak & Co. in New York.
AMC’s shows include “Mad Men,” “Breaking Bad,” which begins its next season July 15, and “The Walking Dead,” the highest-rated cable drama from Feb. 12 to March 18 this year, according to Nielsen data.
Dish is replacing AMC with HDNet commercial-free movies. HDNet’s main channel, with shows such as “Bikini Barbershop” and “Drinking Made Easy,” will stand in for IFC, the AMC-owned independent film channel. The Style channel will replace We TV, a network aimed at women.
AT&T said this week it hadn’t reached terms on a new contract because AMC is asking for “nearly double” what competing pay-TV services pay. Last minute deals in contract talks between pay-TV operators and programmers are common, said Amy Yong, an analyst for Macquarie Capital USA Inc.
AMC and AT&T reached a final-day agreement two years ago, avoiding a programming halt in a similar stand-off over fees.
AT&T hasn’t said what channels will replace AMC if it fails to reach an agreement, and negotiations between the two sides continue, said Dawn Benton, an AT&T spokeswoman.
“I don’t think that it is unique to have these types of disputes from any content owner and TV network,” said Yong. “It’s just unfortunate that two high TV profile negotiators are doing this at the same time.”
To contact the reporters on this story: Alex Sherman in New York at firstname.lastname@example.org; Kelly Blessing in New York at email@example.com
To contact the editor responsible for this story: Nick Turner at firstname.lastname@example.org