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Ergen Threatens to Drop Networks

12/16/2001 7:00 PM Eastern

Playing hardball with several programmers, EchoStar Communications Corp. plans to make good on a threat to drop ABC Family effective Jan. 1, and is making rumblings about the future carriage of ESPN Classic and some Fox Sports Net regional outlets.

Last week, during his monthly "Charlie Chat" session, EchoStar chairman Charlie Ergen said his Dish Network service would remove ABC Family from its lineup at the end of this year.

If so, ABC Family would lose an estimated 6.4 million of its 84.5 million subscribers.

Ergen couldn't be reached for comment, but EchoStar spokes-man Marc Lumpkin confirmed the Jan. 1 switch-out of ABC Family.

"Its [ABC Family] pricing has not gone down, and yet its ratings have fallen," Lumpkin said.

The loss of EchoStar carriage would be a major blow to ABC Family and The Walt Disney Co., which paid $5.2 billion to buy the channel. ABC Family is now carried on Dish's basic package, "America's Top 50."

ABC Family could take a second hit if Ergen secures regulatory approval to buy DirecTV Inc. and combines that direct-broadcast satellite service with EchoStar's Dish Network. If ABC Family were to lose its current DirecTV distribution — an estimated 10.3 million homes — its total subscriber loss would rise to an eye-popping 16.7 million.

Terms of DirecTV's affiliation agreement with ABC Family weren't disclosed, so it's unclear whether Ergen could legally keep the Disney-owned network off the program lineup of the merged EchoStar-DirecTV DBS service.

Lumpkin declined to comment on that issue directly. He said only that EchoStar will be evaluating DirecTV's deals with programmers to help determine which services would be carried on the merged EchoStar-DirecTV platform.

Disney officials say they are still negotiating with EchoStar and don't expect ABC Family to be dropped.

"We are currently in conversations with EchoStar and fully expect ABC Family to retain its position in the company's programming lineup," said ABC Cable Networks Group president Anne Sweeney. "We do not comment on specific negotiations, but in our discussions with the industry, it is clear that cable and satellite operators understand the value of a network run by the preeminent company in family entertainment."

IN ERGEN'S SIGHTS

Ergen has been trying to dump ABC family — the former Fox Family Channel — from Dish Network for more than a year.

In September 2000, he filed a suit in U.S. District Court in Denver against Fox Family's then-owners, Saban Entertainment Inc. and News Corp., in a bid to discontinue carriage.

At that time, Ergen cited the service's prior change in ownership: from the Rev. Pat Robertson's International Family Entertainment Inc., which operated the network as The Family Channel, to Saban. But several weeks ago, both sides agreed to have that suit dismissed without prejudice.

If Ergen goes ahead and drops ABC Family, the repercussions are likely to be watched closely by the cable industry — particularly a number of MSOs who must renegotiate their lapsed carriage deals with Disney.

ABC Family is already out of contract with Charter Communications Inc. and Cablevision Systems Corp., and its deal with Time Warner Cable is about to expire. Those MSOs could legally drop ABC Family at will.

It is relatively rare for MSOs to take networks off. And some cable operators have been wary about dumping ABC Family for fear it will cause a protest from the religious right, because the network airs evangelist Robertson's The 700 Club.

Some veteran industry observers believe Ergen is trying a negotiating ploy.

One ex-MSO official questioned whether Ergen would risk starting a dispute with ABC Family while he's in Washington trying to get his merger deal approved.

"Charlie can't be so stupid as to cause a public outcry," the executive said.

According to legal papers filed in the EchoStar suit last year, the DBS provider has a 10-year contract to carry ABC Family through August 2005. A Disney source said the company believes EchoStar is legally bound to continue carrying ABC Family. Disney would likely go to court for an injunction if Ergen drops the service, the source said.

Lumpkin said there was no specific replacement for ABC Family yet, but said it will be some other network that offers family-oriented programming.

During his "chat" last week, Ergen also noted that EchoStar's affiliation contracts were also "up" with ESPN Classic — also owned by Disney — and with Fox Sports Net "in select regions."

EchoStar is still negotiating with ESPN Classic, Lumpkin said. But he called the service "an expensive channel," and pointed out that ESPN has also levied annual rate increases.

EchoStar's contract with ESPN Classic expires Dec. 31. The DBS provider has longer-term deals with ESPN, ESPN2 and ESPNews.

ESPN Classic is on Dish Network's middle-tier package, "America's Top 100."

With respect to the ESPN Classic-EchoStar contract talks, ESPN spokesman Chris LaPlaca said, "We have a great relationship with Charlie and we are in conversations with him. We hope we can resolve it."

During his "chat," Ergen said EchoStar has deals to continue carrying the Fox Sports Net-branded services owned by Rainbow Media Holdings Inc., but it has not signed renewals with News Corp. for some Fox owned-and-operated regional sports networks.

According to Lumpkin, some Fox Sports Net services are "at risk," but he wouldn't say how many or which ones. "We're having discussions," Lumpkin said.

At issue, reportedly, are a dozen regional sports services owned and operated by Fox.

"We're continuing to talk with EchoStar," said Lindsay Gardner, executive vice president of affiliate sales and marketing for the Fox Cable Networks Group.

REGIONALS: HARD TO DROP

Industry observers doubt EchoStar would actually drop any of Fox's locally popular regional sports networks, alienating sports fans who sign up for DBS to get such programming.

Ergen and News Corp., parent of Fox Sports Net, have had their problems over the years. For starters, Ergen outbid Rupert Murdoch's News Corp. for DirecTV.

In November, a spat broke out over DirecTV's plans to disclose the terms of its programming contracts to its proposed buyer, EchoStar and Ergen. DirecTV maintained it was required to reveal the details of its carriage deals.

Fox Cable Networks Group wrote DirecTV a letter claiming those contracts were confidential, and said any such disclosure was impermissible under antitrust law.

DirecTV spokesman Bob Mercer declined to comment.

DirecTV offers ABC Family on its basic "Total Choice" package, which reaches its more than 10.3 million subscribers.

Monica Hogan contributed to this report.

 

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