Dish Ditches AMC while AT&T Remains Faithful
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Dish Network (NASDAQ: DISH) removed AMC Network (NASDAQ: AMCX) from its pay-TV service early on Sunday when the contract expired without entering into a new agreement. Dish had already dropped its Sundance channel in early June and finally took the much expected call of replacing AMC channels as the companies were unable to reach an accord.
What is Dish doing to replace AMC?
The company is replacing AMC Network channels WE, IFC and AMC with movie and entertainment content. It is providing Style and HDNet on behalf of WE TV and IFC, which it considers to be a stronger offering and more exciting for viewers. "These are networks that will bring great entertainment, including first-run, commercial-free movies in high definition to our customers," says Dave Shull, Senior Vice President of Programming for Dish.
What are the reasons stated by each party?
Dish ditching AMC – the reason
The second largest satellite provider, Dish said that the reason for not renewing the contract is that AMC’s channels are too expensive relative to the viewership. The fee charged by the company is too high for such low-rated channels. In addition, AMC proposes to increase the fee charged by threefold, from 26 cents per subscriber per month to 75 cents in the next four to five years. Already the current charge of 26 cents is more than the History Channel and ABC Family.
The rate increase plan does not make sense particularly as AMC has lessened the value of its programs by making its selected well-liked shows available on the internet through Amazon.com, iTunes and Netflix. Also what's striking is that despite airing shows like Mad Men, which brought a new cult altogether, AMC managed to attract prime time an average of only 1.2 million per night compared to rival Comcast’s (NASDAQ: CMCSA) US channel, which attracted an average of 3 million.
So Dish says that the unreasonably high fee demand and the "devaluing" of its channel by offering it on the internet are the reasons for terminating relations with AMC. What does AMC have to say?
AMC’s side of the story
AMC says that Dish did not even discuss the rates issue with it and hasn’t dropped the company because of low channel ratings. The satellite company claims that The Walking Dead is the most popular and highest-rated scripted drama on cable. If the two companies do not mend the situation and strike a deal soon, Dish’s 14 million subscribers will also miss the debut of the fifth and final season of Breaking Bad on July 15.
AMC believes that the separation in the relationship with Dish came as a reaction of the latter toward the ongoing litigation coming from a 2008 lawsuit. AMC had sued Dish for $2.5 billion to compensate for the damages that it brought from the inappropriate termination of a 15-year bond with VOOM HD, a unit of AMC. Dish customers will now have to suffer the consequence of the unrelated lawsuit as they wouldn’t be able to enjoy some of their favorite shows.
So now what?
The deal with Dish’s rival AT&T
Though AT&T (NYSE: T) grumbled about AMC’s "excessive rate increase," the two managed to bridge the differences. The contract between them expired on June 30, however AMC channels continued to be on U-verse. The two companies reached a long term agreement to continue delivering services to U-verse TV subscribers. AT&T has roughly 4 million subscribers in the US. Their agreement allows them uninterrupted services of AMC Network’s IFC, WE TV, AMC and Sundance channels. Nothing more is disclosed about the terms of the deal.
Concluding thoughts
This is not the only case where channels have been dropped over a fee dispute; recently Time Warner Cable’s (NYSE: TWC) subscribers too faced the same for Madison Square Garden Co.'s channels before the companies reached a compromise on the fee hike.
Fee clashes between channel distributors and TV channels owners often lead to the dropping of the disputed channels for a temporary phase. Most of the cases come to a common platform after negotiations, while some disrupt the services permanently. The bittersweet relation between AMC and the two distributors is just the latest example.
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