Univision Sues Charter Communications Over Licensing Fees

  • Spanish-language broadcaster calls Charter fees below-market
  • Charter closed $55 billion Time Warner Cable takeover in May

Univision Holdings Inc. sued Charter Communications Inc. and accused the cable company of attempting to shortchange it on programming fees after acquiring Time Warner Cable Inc., in a case that highlights the tension between programmers and distributors as pay-TV subscribers decline.

Charter is claiming it’s entitled to pay lower programming rates under a long-term contract between Time Warner Cable and Univision that runs through June 2022, according to the lawsuit, which was filed in New York state court Friday.

One reason that Charter bought Time Warner Cable in May was because it could save on programming costs by paying Time Warner Cable’s rates. The combined company has millions more subscribers now, giving it more leverage when negotiating fees with programmers to carry their channels.

Cable operators are trying to reduce the rising cost of programming because they must pass on the costs to consumers in the form of higher monthly bills. That, in turn, is prompting more customers to cancel their pay-TV service and cobble together cheaper online options like Netflix Inc. and Dish Network Corp.’s Sling TV, putting more pressure on the TV industry.

Disputes Arise

There are often disputes between programmers such as Univision and distributors of content such as Charter as contracts come up for renegotiation every three to five years or so, and they’re not always contentious, said Paul Sweeney, an analyst with Bloomberg Intelligence.

However, programmers have fought back over the last 10 to 15 years and are seeking higher rate increases, which has led to some networks going dark when negotiations stall and they pull their programming, Sweeney said.

It’s rare that parties resort to litigation at this stage of the negotiation, which makes the Univision lawsuit a possible signal of change, Sweeney said.

"This marks an escalation in what has been a long ongoing area of conflict between programmers and distributors," Sweeney said.

Univision, the largest Spanish-language broadcaster in the U.S., accused Charter of breaching their contract by using the acquisition to impose fees that are “dramatically below” current market prices for the network’s content. Charter, based in Stamford, Connecticut, closed its $55 billion takeover in May and says it intends to phase out the Time Warner Cable brand, which has earned low marks from customers for years.

‘Long-Term Contract’

“We have a long-term contract with Univision and we expect them to honor it,” said Justin Venech, a Charter spokesman.

Charter’s contract with Univision expired June 30, but Univision says when it went to renegotiate the rebroadcasting fees, Charter asserted that Univision’s deal with Time Warner now covered the entire company.

Charter’s position that Time Warner Cable acquired both networks and is managing them “flies in the face of dozens of official public representations made by Charter over the past year,” Jonathan Polkes, an attorney representing Univision, said in a letter to the court. The company called the proposition “preposterous,” in a statement Friday.

Univision’s complaint comes as the New York-based company is aiming for a initial public offering in the second half of the year that could raise as much as $1 billion, people with knowledge of the matter said in April.

"Univision had no alternative because Charter has outright refused to negotiate a renewal agreement," the network said in the statement. "Charter insists that the contract Univision had with Time Warner Cable is controlling."

The case is Univision Communications Inc. v. Charter Communications Inc., 653568/2016, New York State Supreme Court, New York County (Manhattan.)

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