Lions Gate’s Burns Criticizes Most-Favored Nation Deals

Lions Gate Entertainment Corp. (LGF) Vice Chairman Michael Burns took a swipe at widely used contract provisions that ensure pay-TV companies all pay the same price for programming, saying they hurt viewers.

So-called most-favored nation deals are common when cable and satellite TV operators license channels and programs from companies such as Lions Gate, the Santa Monica, California-based studio that makes “Mad Men” and “The Hunger Games.” Those terms should be eliminated, Burns said today at the Milken Global Conference in Beverly Hills, California.

“They are horrible for the consumer,” Burns said. “Consumers get screwed, why can’t we negotiate independently?’

The contracts stipulate that pay-TV operators such as Comcast Corp. (CMCSA) can match subsequent deals networks get for their programming. While most-favored nation provisions were created to give smaller cable-TV companies equal standing, they now benefit larger players, Burns said. MFNs prevent Lions Gate from doing individual deals, like a promotion with one distributor. As a result, consumers pay more, he said.

‘‘As consolidation in the industry keeps happening, there is going to be more power concentrated in these deals,” Burns said. “Consumer choice is going to be limited.”

The Lions Gate executive didn’t specifically mention the $45 billion plan by Comcast, the largest U.S. cable-TV company, to acquire No. 2 Time Warner Cable Inc. (TWC) The deal is being evaluated by regulators.

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Most-favored-nation deals benefit consumers, said John Demming, a spokesman for Philadelphia-based Comcast.

“In the video programming industry, each content supplier negotiates separately and therefore MFNs are designed to ensure distributors are provided with equitable terms on the content they purchase,” Demming said in an e-mailed statement. “Economically, MFNs also help restrain the rate of cost increases, which benefits consumers.”

Netflix Inc. Chief Executive Officer Reed Hastings has come out against the Comcast-Time Warner Cable deal, while other media companies say they’re examining the issue.

The merger must come with certain guarantees, CBS Corp. Chief Executive Officer Leslie Moonves said on a separate panel at the Milken event.

While Moonves isn’t against the deal, “there will be concessions made and guarantees we are treated fairly,” he said.

Comcast has been working to expand its Xfinity On Demand digital storefront for home-video releases, by striking deals with major studios in competition with Apple Inc.’s iTunes and other services.

The cable provider said today it will add MGM movies starting May 20, and in some cases will begin selling titles a week or more before they hit retail store shelves.

Lions Gate rose 2.5 percent to $26.53 at the close in New York. The stock is down 16 percent this year. Comcast rose 0.4 percent to $51.76.

To contact the reporter on this story: Anthony Palazzo in Los Angeles at apalazzo@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net Rob Golum

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