EchoStar made nice with affiliates on Monday, even as a judge was handing down an unfavorable ruling in the company’s legal battle with TiVo.
The Colorado satcaster, which runs the Dish Network, agreed to dole out $100 million to NBC, CBS and ABC affils to settle a long-running dispute over so-called distant-network viewers.
Settlement means that, if a judge approves, as many as 1 million customers outside of metro areas will be allowed to receive a signal from affiliates of the three nets.
But just hours after that settlement was announced, EchoStar had a setback when a federal judge put the temporary kibosh on its countersuit against TiVo.
U.S. Magistrate Judge Caroline Craven ruled in Texas that the company couldn’t proceed with its countersuit until the U.S. Patent Office had reviewed the EchoStar patents in question. Those reviews could take months or even years, legal experts said.
TiVo has maintained that EchoStar’s patents are invalid because older patents cover similar technology.
In a further blow to Dish, a judge’s approval of the affiliate settlement was by no means a sure thing. EchoStar still could face an injunction from a district court judge that would essentially prevent it from offering the three nets to subs outside metropolitan areas.
An appellate court had already instructed the district court to issue such a ruling, and the settlement is an attempt to head off that order.
EchoStar spokeswoman Kathy Gonzales acknowledged the company is in a precarious position. “It’s a waiting game at this point,” she said of the distant-network situation. “An injunction can come down at any time.”
If that happened, EchoStar likely would seek new legislation to allow distant-network viewers and the $100 million settlement.
For the moment, the settlement allows each side to claim victory. The affiliates are able to say they were getting a fair price for allowing their stations to reach non-metro viewers. And after years of litigation, EchoStar can say it’s taking a one-time financial hit that will prevent it from losing subscribers.
Notably absent from the EchoStar settlement, however, was Fox. Network pulled out of negotiations with the satcaster last week and said Monday that it was not in any further talks with EchoStar.
Observers were quick to point out that Fox is a corporate sibling of Dish competitor DirecTV — a good reason for balking.
But a News Corp. spokesman noted the company had maintained its position against distant-network subs before it owned its stake in the satcaster and that a settlement was outside the spirit, and possibly the letter, of the law prohibiting distant-network subs.
Copyright law regulates the way in which, and to whom, distant networks may be transmitted. Law disproportionately affects EchoStar, which depends more on customers outside metropolitan areas than do DirecTV or the cable companies.
EchoStar showed signs of playing hardball with Fox, with Gonzales pointing to the net’s hesitation as the reason a judge may not agree to the settlement with the other three networks. “Fox’s last-minute tactic could scotch the settlement,” she said.
In the good-news department, EchoStar recently was granted the right to continue supporting and selling its millions of DVRs while it appealed a TiVo lawsuit contesting that right.
But EchoStar now faces $90 million in fines as well as the dismantling of those units if it cannot overturn the original pro-TiVo ruling.
Whether all this could continue the drumbeat for an ownership shakeup is, to Wall Street, the delicious question. Some on the Street have called for DirecTV to make a new bid to buy EchoStar after an earlier offer was refused by regulators.
Analysts want Rupert Murdoch to buy the company to consolidate its hold on the satcaster market and strengthen his position against newly resurgent cable companies. Regulators had previously scotched such a deal, but if EchoStar is weakened — either on the bottom line or with subscribers — in a material manner, a case could be made again for a combination.