EchoStar, Viacom to keep talking

One week ceasefire negotiated within a day of filing

NEW YORK — EchoStar’s lawsuit against Viacom is temporarily on hold, as the two parties agreed Thursday to a one-week extension that will keep CBS local broadcast signals on the Dish Network in key markets pending a resolution of their increasingly contentious affiliation negotiations.

No stranger to using the legal system as a negotiating tool, EchoStar chief exec Charlie Ergen late Wednesday filed suit against cable network giant Viacom, alleging the conglom is abusing its considerable programming power by threatening to drop critical CBS station distribution in 15 markets if EchoStar refuses to comply with Viacom’s cable carriage demands.

The markets in question include Los Angeles and New York and include some 1.6 million EchoStar subscribers who stand to lose their local feed via satellite, EchoStar claimed in a suit filed in a San Francisco court.

The company apparently is dragging its heels over Viacom’s terms demanding carriage for the Nicktoons channel, a prized basic slot for pre-school net Noggin and extension contracts for CMT, TVLand and Spike TV from 2005-08. Neither company would confirm details of the proposed contract.

“There’s an antitrust issue at stake,” an EchoStar source said Thursday, adding that Viacom’s threat of pulling CBS coverage of the Super Bowl from the public airways is tantamount to “TV extortion.”

A Viacom spokesman dismissed EchoStar’s legal challenge, saying the lawsuit was “without merit.”

“It is merely a strong-arm tactic in what has been a difficult negotiation,” said the spokesman. “We’re continuing to negotiate with EchoStar and are hopeful for a reasonable resolution.”

Analysts believe it’s highly unlikely the battle will reach the point that CBS actually would pull the channels and note that, technically, customers could still get their CBS signal over-the-air. Still, Ergen’s litigious response to Viacom’s programming leverage could provoke greater regulatory review of media companies’ power vis-a-vis distribution rights.

Viacom, which in the last few weeks has agreed to multiyear, multinetwork deals with Comcast, Cox and DirecTV, certainly is not going to cave in to Ergen’s pricing demand. Comcast, which has more than 21 million subs, is believed to have agreed to increases of mid- to high-single-digit percentages in affiliate fees across all its channels. It’s understood that Viacom is pushing for higher rate increases from EchoStar, which has just under 9 million subs.

Ongoing battle

Whether Viacom will call Ergen’s legal bluff is unclear, but the battle between content providers and distributors is unlikely to abate any time soon. Analysts say EchoStar has more to lose than Viacom if the channels are dropped, noting Time Warner’s PR disaster when it dropped ABC affiliates for three days back in 2000.

Under retransmission rules, cable and satellite providers are obliged to sign distribution deals for the rights to carry local broadcast channels, which technically could include cash payments. However, media congloms instead have opted to clear new cable nets in exchange for carriage of their broadcast stations.

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