Paxson Warns It May Lose Distribution in DirecTV Fight

Mar 7, 2006  •  Post A Comment

Paxson Communications warned that it could lose more than 5 percent of its prime-time television households if it fails to reach a new affiliation agreement with satellite operator DirecTV Group — but stressed the loss would be temporary.

In a filing with the Securities and Exchange Commission, the West Palm Beach, Fla.-based broadcaster said it is working with DirecTV to resolve an affiliation fight arising from Paxson’s change in programming last year and DirecTV’s desire to terminate an affiliation agreement because of those changes.

However, Paxson said that if DirecTV drops the programming, the broadcaster would expect to regain those lost viewers once it exercises its must-carry rights at the end of 2008.

The legal tussle appears to stem from Paxson’s decision last summer to change its programming strategy, dropping the Pax TV name and family-friendly programming focus in favor of creating the “i” network, which aims to attract programming from independent producers and syndicators.

According to the filing, DirecTV informed Paxson that its programming changes violated an affiliation agreement signed in September 2002 and that the carriage pact would be terminated on Feb. 28, 2006. In anticipation of a legal row, DirecTV filed a complain in January seeking a declaratory ruling that it has a right to terminate the affiliation agreement and cease distributing Paxson’s programming.

Despite the legal wrangling, both companies are continuing to work toward reaching a resolution, and on Feb. 28 agreed to keep Paxson programming on the air another 30 days in hopes of reaching an agreement.

If a pact can’t be reached or if the court rules DirecTV can drop Paxson, the broadcaster estimates it would lose 5.5 percent of its households, which the company said would adversely affect its revenue.