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AMC Sues Time Warner Over Termination Threat

Attempting to thwart a leverage play by Time Warner Cable, American Movie Classics Co. on Nov. 14 sued Time Warner Cable in New York state Supreme Court, seeking to bar the MSO from terminating its carriage agreement with AMC.

Officials from AMC parent Rainbow Media Holdings called Time Warner's move the catalyst for a more grandiose attempt to bundle Rainbow's regional sports networks under one corporate agreement.

The lawsuit said Time Warner initially gave notice June 6 — and again Sept. 30 — of "intent to terminate the agreement" with AMC within 90 days because the channel had violated its contract by moving away from a classic-movies format to offer more contemporary films.

In particular, Time Warner referenced a clause that prohibits AMC from airing movies that were produced after 1993, according to the suit. In November, AMC is airing at least two post-1993 movies: The Shawshank Redemption (1994) and Alien: Resurrection (1997).

Time Warner then purportedly proposed paying a reduced licensing fee for AMC after the deal terminated.

AMCC claimed no such clause exists in the agreement and said its on-air changes do not "give rise to a right to terminate."

AMCC estimates wrongful termination would result in the loss of at least $250 million in lost affiliate fees and advertising revenue.

A Time Warner spokesman said the MSO believes the suit "is totally without merit."

One Rainbow executive said Time Warner's attempt to dissolve its current multiyear agreement with AMC — which ends in 2008 — is a play to leverage Rainbow into a new corporate deal for its regional sports services.

Rainbow owns and operates regional channels in Chicago, Florida, San Francisco-Oakland, New England and Ohio, as well as Madison Square Garden Network and Fox Sports New York in New York City — Time Warner's largest single market.

"They want to put all of those deals into one big corporate contract," the Rainbow executive, who asked not to be named, said.

Time Warner also wants to be able to shift services such as MSGN and Fox Sports Net out of a broad channel package and into pay sports tiers.

The MSO's New York and New Jersey systems recently introduced a $3.99 monthly sports tier featuring NBA TV, The Tennis Channel, extreme-sports network Fuel and a trio of Fox Sports Digital Networks (Fox Sports Atlantic, Fox Sports Central and Fox Sports Pacific).

Time Warner Cable officials have said they plan to eventually place MSGN, Fox Sports New York and the Yankees Entertainment & Sports Network (YES) into a digital tier.

YES is already suing Time Warner for breach of contract after the MSO began offering YES as a $1 à la carte service in those systems last July.

The suit quotes Time Warner senior vice president of programming Fred Dressler stating the MSO might send a "nasty" letter threatening termination of the AMCC agreement as leverage for "unrelated" discussions between Time Warner and AMCC parent Rainbow.

"On information and belief, Time Warner is attempting to create doubts about the [AMC] agreement in order to influence negotiations Time Warner is conducting with another company under common ownership with AMCC," the suit said.

R. Thomas Umstead
R. Thomas Umstead

R. Thomas Umstead serves as senior content producer, programming for Multichannel News, Broadcasting + Cable and Next TV. During his more than 30-year career as a print and online journalist, Umstead has written articles on a variety of subjects ranging from TV technology, marketing and sports production to content distribution and development. He has provided expert commentary on television issues and trends for such TV, print, radio and streaming outlets as Fox News, CNBC, the Today show, USA Today, The New York Times and National Public Radio. Umstead has also filmed, produced and edited more than 100 original video interviews, profiles and news reports featuring key cable television executives as well as entertainers and celebrity personalities.