9:03am PT by Eriq Gardner
CNN's $100 Million Problem: Collecting Payment for People Watching on Airplanes
Sometime in the next week, CNN's parent company Turner will be filing court papers providing evidence for how it has allegedly been cheated by Dish Network out of license payments for the cable news network. The case has remained under the radar for more than a year since it was initially filed under seal. Dish has acknowledged what's happening very broadly in securities filings, yet thanks in large part to television executives treating their contractual terms like the secret ingredients for a more destructive nuclear bomb, the matter has been pursued under a veil of intense secrecy and commanded little press notice. In fact, the dispute is about people watching CNN on airplanes — and there’s an estimated $100 million at stake.
The case has been discussed in public just once.
That came last spring during the Justice Department's lawsuit over the $85 billion merger between AT&T and Time Warner. The courtroom was full of reporters and analysts, but everyone seemed to overlook one notable moment when Dish executive Warren Schlichting was on the witness stand.
Schlichting addressed whether CNN was truly a "must-have" network in this politically obsessed age. He wanted to push the point that the merger would be bad for AT&T’s rivals in the television distribution space, as CNN’s parent company could potentially jack up the fees for the right to carry the news network. Then came cross-examination.
“In fact, you’re in litigation with Turner right now over CNN, correct?” asked AT&T’s lawyer.
“And your position in that litigation is that you have been overpaying for CNN, correct?”
“According to the contract, we believe we’ve been overpaying.”
Here’s what can be gathered from highly redacted court papers: As part of a letter agreement in 2015, Dish gained the right to distribute CNN on its satellite service on commercial airlines. Now, the parties are at odds on how to properly calculate monthly license fees, with damage estimates ranging from $30 million to $100 million. Turner asserts that Dish isn’t correctly reporting and paying for the airline passengers who watch CNN (or at least have the option of watching Anderson Cooper). Dish contends that until February 2017, it was paying too much until it discovered a mistake in its calculations. Dish then informed Turner it would be recovering overpayments by reducing the license fees going forward. CNN didn’t like this. Dish was supposed to receive a set number of broadcast minutes for its own commercial promotions and now alleges that Turner — which thanks to the AT&T merger is now a sister company of DirecTV — isn’t providing such time to hype its own services.
As for the rest, articulated for the judge’s eyes only, one can only speculate. Are the parties quarreling over how to count subscribers who travel through air and want to check in on CNN’s hunt for missing Malaysia Airlines flight 370? Is Dish counting planes while Turner is counting seats?
For now, the basis for the contractual arguments remain under wraps, but the forthcoming set of summary judgment papers could shed more light on licensing at a time when networks are becoming more vertically integrated. Then again, both Dish and Turner are pushing to keep as much under the wraps as possible. It's up to U.S. District Court Judge Ronnie Abrams to decide how extensively these media companies can use the taxpayer-funded court system to privately litigate their high-stakes battle.
Turner declined comment, while Dish didn't respond to a request.