HBO Sues EchoStar for License Fees

HBO filed a lawsuit against EchoStar Communications seeking $90 million in what the network said it is owed in programming fees, the improper calculation of licensing fees and accrued interest payments.

The premium service filed suit against the nation’s No. 2 direct-broadcast satellite provider earlier this month seeking $50 million from the late payment of license fees and interest dating back to 2001, plus another $40 million stemming from the underpayment and miscalculation of fees.

The parties have been out of contract since the end of 2006

"We’re not going to elaborate on the lawsuit. We believe it speaks for itself,” said an HBO spokesman. “EchoStar owes us a substantial amount of money and we’d like to get paid."

EchoStar contended that the legal dispute stems from a program access complaint its Dish Network was forced to file Nov. 15 with the Federal Communication Commission against HBO, sister company of Time Warner Cable. “The same group also recently shut off Court TV after we asked for nondiscriminatory pricing, a cornerstone of program-access protection," the company said in a prepared statement. “Only now has HBO brought suit in retaliation for us filing a complaint with the FCC."

The HBO spokesman responded by saying, “We are confident that we will be found to be fair and nondiscriminatory. The two actions have nothing to do with each other."

Court TV lost carriage on EchoStar’s most widely distributed tier, America’s Top 60, losing about 11 million subscribers, on New Year’s Eve when the network’s carriage deal expired.

HBO’s lawsuit contended that EchoStar breached its contract, first signed in 1995, by not making its monthly license-fee payments on a timely basis -- a practice that triggers a provision for accrued interest. Since January 2001 and continuing to date, EchoStar’s breach of the agreement has resulted in unpaid accrued interest totalling in excess of $50 million, according to HBO.

Filed Jan. 12 in the United States District Court for the Southern District of New York, the suit also claimed that EchoStar owes HBO another $29 million, plus $2.6 million in accrued interest, after the DBS company stopped participating in an incentive program aimed at offering, marketing and promoting HBO and sister service Cinemax on Dish. According to the suit, HBO, in a document dating back to December 2002, offered a reduction in its license fee provided that EchoStar complied with those terms -- something it stopped doing as of Feb. 1, 2006.

Additionally, HBO is seeking another $7.4 million and $1.2 million in related interest for certain fees the programmer had agreed to waive in connection with an acquisition campaign EchoStar proposed to implement from Aug. 16, 2005-Jan. 31, 2006. According to the lawsuit, HBO agreed to waive license fees for a period for a number of the new Dish subscribers who accepted the specified offer. However, HBO’s suit avered that EchoStar incorrectly calculated the value of such license-fee waivers.

Dish Network, through a statement, said it wants a fair and reasonable long-term deal with HBO and is “working hard to negotiate a fair contract. At the same time, we must protect our customers from unreasonable rates."