WASHINGTON — Since Monday, top Dish Network executive Warren Schlichting has been testifying that the potential AT&T-Time Warner merger would have a harmful effect on competition, including causing the potential loss of Turner networks from Dish’s platform and a resulting exodus of subscribers.
But on Tuesday, AT&T-Time Warner’s lead counsel Daniel Petrocelli challenged those predictions with some of Dish co-founder and chairman of the board Charlie Ergen’s past remarks about the value of the Turner networks back in 2014, when CNN and other channels went dark for about a month on the satellite platform. TNT and TBS, the most popular networks, remained on the satellite platform.
Petrocelli, in his cross-examination of Schlichting, president of Sling TV, referred to an investor call that Ergen gave in the midst of that blackout. He called it a “non-event” to lose the channels, noted that CNN was no longer a top 10 network, and said that “if we’re not going to be in a relationship with Turner, then we would not have to raise our prices next year. That would be slightly cash positive for us from a cash flow perspective.” He also pointed out that Ergen called Turner networks “one of the easier ones to take down.”
Ergen, Petrocelli noted, also said in another statement that “there’s not any channel price too high…we won’t be willing to take down.”
Schlichting tried to note that Ergen’s comments came in the midst of carriage negotiations — suggesting that he was “negotiating to the press.” But Petrocelli then pressed him on whether that Ergen was being truthful on an investor call.
“He was being truthful,” Schlichting said.
Pressed on more of Ergen’s comments, Schlichting later said in his cross-examination, “You can make truthful statements in the middle of negotiations, and send a message.”
On Monday, Schlichting testified that the Turner networks, with their mixture of sports, entertainment and live programming, are the kind of “must have” content whose loss would cause subscribers to go to AT&T’s DirecTV. He said that the absence of Turner also posed a particular risk for Dish’s Sling TV, which offers a slimmed-down menu of channels delivered over the internet.
The Justice Department sued to block the AT&T-Time Warner merger in November, arguing that the increased bargaining power of AT&T-Time Warner would lead to higher prices for consumers. They claim the combined company will be able to demand higher prices for Turner networks in carriage negotiations with distribution rivals.
The merger, Schlichting said, would give AT&T-Time Warner so much leverage that Dish would face a “Hobson’s choice” — take a deal for Turner networks on onerous terms, or face the loss of the networks and subsequent loss of subscribers.
Schlichting said that Ergen was a “wildcat” in the business and that Dish had a reputation as a tough negotiator.
Petrocelli noted that Dish has had more programming blackouts than other distributors, and inferred that Dish’s hardball tactics would be no different after the merger. He cited another of Ergen’s quotes — that the “real negotiation starts when we go dark.”
Schlichting said that “Charlie’s Charlie,” but that the circumstances would change post-merger, and that “everything is different.”
“Charlie is rational,” he said. “He will be looking at a different set of facts.”
The judge in the case, Richard Leon, appeared to consider striking Schlichting as a witness on Monday after the Justice Department revealed that his attorney from Steptoe & Johnson sent him a transcript of testimony that an executive from Cox Communications gave last week.
Petrocelli pressed Schlichting on how much of the testimony he read, but the answer was unclear in his cross-examination. On Monday, Judge Leon said that Schlichting’s access to the transcript was a violation of rules prohibiting witnesses from reading about proceedings prior to taking the stand. Leon allowed Schlichting to testify anyway, after a long deliberation with attorneys on both sides on Monday and after reviewing the emails from Schlichting and his attorney.
This post was corrected to reflect that the 2014 blackout of Turner networks from Dish Network did not include TNT and TBS.
(Pictured: Charles Ergen)