AMC Sues TW Cable; Fees, Programming Core Issues

Nov 17, 2003  •  Post A Comment

Rainbow Media’s American Movie Classics filed a $250 million breach-of-contract lawsuit Friday against Time Warner Cable, alleging the multiple system operator violated an affiliation agreement as part of a broader tactic to gain leverage as Time Warner negotiates with Rainbow in areas not tied to AMC.
The suit, filed in New York State Supreme Court, comes after a five-month battle between AMC and Time Warner over what appeared to be Time Warner’s dismay at AMC’s transformation into an advertising-supported network. It also appears to highlight both the lengths to which an MSO will go to manage programming fees and the risks a cable network faces when it changes its programming and business strategy to remain competitive.
AMC is seeking to restore the affiliation pact with Time Warner. At the same time it is arguing that it is entitled to damages associated with lost fees and advertising revenues for what it calls Time Warner’s unilateral and wrongful termination of the affiliate agreement.
Officials at Time Warner and Time Warner Cable declined to comment. A Time Warner Cable spokesman said the company had not yet received a copy of the suit as of late Friday afternoon.
The battle began last June, according to the lawsuit, when Time Warner gave AMC 90 days’ notice that it was terminating the affiliate agreement because AMC had breached the terms of the pact, which called for the net to carry classic movies and original programming related to those movies. Time Warner claimed the breach involved airing films produced after 1993.
AMC denied the contract had any such language, and argued that the termination notice was a ploy to force the network to lower its programming fees or face being repositioned on a tier with lower subscriber penetration.
The lawsuit states that Time Warner withdrew the first termination notice, but submitted another one in September, again demanding a lower price be paid to AMC.
While AMC acknowledges that it has made changes, including the move toward an ad-supported format and the airing of more recent films, it said those moves “do not constitute a material change in the general quantity or quality of programming on the service.”
Instead, AMC alleges that Time Warner has slapped the net with a termination notice to force AMC to lower its programming fees.
In addition, AMC accused Time Warner of using the network as leverage for other negotiations being conducted between Rainbow and Time Warner. In support of that claim the lawsuit cited a conversation that allegedly took place between Fred Dressler, Time Warner Cable’s executive VP of programming, and an AMC employee during which Mr. Dressler called the AMC-Time Warner dispute “leverage” designed to encourage Rainbow to negotiate with Time Warner on issues related to other programming services.