business

Time Warner Defends ‘No Blackout’ Offer as Fix for AT&T Deal

  • Proposal weakens Time Warner’s bargaining power, Warren says
  • Trial testimony focuses on negotiations with pay-TV companies

A Time Warner Inc. executive defended an arbitration plan aimed at resolving the Justice Department’s opposition to the company’s proposed sale to AT&T Inc., saying pay-TV distributors would gain an edge in programming negotiations.

Richard Warren, president of content distribution at Time Warner’s Turner Broadcasting, testified Tuesday that arbitration offered to cable and satellite TV companies would reduce Turner’s leverage because it won’t have the option to walk away from negotiations and pull programming from the distributor.

"I’m in a weakened position," Warren said.

The hard-fought negotiations between Turner and pay-TV companies such as Dish Network Corp. over programming have been a constant theme in the antitrust trial over AT&T’s $85 billion deal for Time Warner. The Justice Department says the takeover should be blocked because AT&T will gain leverage in the negotiations and be able to raise costs for TV subscribers by hundreds of millions of dollars a year.

AT&T and Time Warner, which dispute the government’s claim that prices will rise, have offered binding arbitration to pay-TV companies when programming negotiations reach a deadlock. Typically, either side can walk away at that point, leaving subscribers without some channels. But the offer from Time Warner would prevent Turner channels such as CNN and TNT from "going dark" during the arbitration.

The Justice Department has dismissed the proposal as a flawed remedy that has no oversight and expires after seven years. The offer also doesn’t apply to HBO, it says.

Pay-TV companies haven’t jumped on the offer. Warren testified that only about 20 distributors out of 1,000 have told Turner they would accept it, and all of those have fewer than 1 million subscribers.

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