Market Minute: Dish Awarded $4.9 Million in ESPN Licensing Dispute


By Nate Raymond and Liana B. Baker

NEW YORK, Feb 28 (Reuters) - A federal jury on Thursday found sports programmer ESPN liable for only one breach-of-contract claim made by Dish Network Corp (DISH) and awarded Dish $4.86 million, a mere fraction of the more than $152 million it had sought.

In a unanimous verdict, the 10-member jury in Manhattan found ESPN liable for breaching a 2005 licensing agreement by allowing rivals to pay lower rates for ESPN Deportes, a Spanish language channel, without extending the same offer to Dish.

But the jury rejected most of Dish's central claims that ESPN, an affiliate of Walt Disney Co, had breached its contract by giving better deals to rival distributors.

Dish Network - Photo Credit: Getty Images
Dish Network - Photo Credit: Getty Images

The award comes amid growing friction between distributors and program makers throughout the entertainment industry.

Filed in 2009, the lawsuit centered on the terms of distribution agreements that ESPN had negotiated with Dish and its competitors for channels that included ESPN Classic, which shows re-runs of older sports events, and ESPN Deportes.

In its rejection of some of Dish's claims, the jury said ESPN was not liable for letting Comcast Corp (CMCSA) in 2006 distribute additional packaging tiers and subscriber packages without first notifying Dish and allowing it a chance to have the same deal. Dish said this cost it $78.9 million, and said that had it gotten the same offer as Comcast, it never would have agreed in 2009 to a deal reducing distribution of ESPN Classic in exchange for expanding distribution of the college sports channel ESPNU.

Dish said that caused another $52 million in damages.

The trial may have an impact on future negotiations between the two companies, whose distribution agreement is to expire this year.

Dish, controlled by billionaire founder Charlie Ergen, has often used lawsuits to gain leverage in these types of negotiations, analysts said.

The case was in fact just the latest courtroom brawl between Dish and ESPN. In 2008, Dish sued ESPN and several Disney (DIS) subsidiaries for not providing high-definition feeds for channels, including ESPN News and Disney Channel.

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Dish is currently appealing a New York state court jury verdict in favor of ESPN and Disney in 2011 that said they could keep $56 million in fees.

A state judge had separately ruled that Dish owed ESPN and Disney $66 million in interest due to late payments under their agreements. An appellate court later upheld that decision.

Stanton Dodge, Dish's general counsel, said in a statement that the company would "remain vigilant in our efforts to ensure that programmers honor their contractual commitments."

A spokeswoman for ESPN said it was "gratified" the verdict rejected all but one of Dish's claims.

Dish shares closed down 7 cents at $34.90 on the NASDAQ, while Disney shares were up 37 cents at $54.85 on the New York Stock Exchange.

The case is Dish Network LLC v. ESPN Inc., et al., U.S. District Court, Southern District of New York, 09-06875.

Photo Credit: Getty Images