Time Warner Attorneys Attack Idea that Merger Could Trigger Sub Losses

Time Warner
Time Warner

WASHINGTON – As the antitrust trial between the Justice Department and AT&T/Time Warner Inc. continues, Time Warner attorneys attacked the U.S. government’s assertion that the deal could trigger large subscriber losses for pay-TV rivals and lead to an abuse of leverage in programming deals.

The government estimates that pay-TV providers would lose about 12 percent of subscribers if they fail to reach a programming deal with Time Warner and channels like CNN and TNT become unavailable on their systems for a protracted period. That risk of losing customers would give AT&T leverage in programming negotiations with competitors, according to the U.S.

But Time Warner attorney Peter Barbur said that estimate didn’t reflect real-world data, and he got a government witness from Comcast Corp. to back the companies’ argument. 

The 12-percent projection came from Massachusetts Institute of Technology (MIT) professor John Hauser, who testified that pay-TV companies would lose 8 percent of their subscribers in the first month of a blackout, with the number rising to 12 percent after a year. Barbur said the federal judge who oversaw intellectual property litigation between Apple Inc. and Samsung Electronics Co criticized Hauser’s survey methods.

Greg Rigdon, an executive vice president of content acquisition for Comcast Corp. who works on negotiations with programmers, contradicted Hauser’s analysis. “I would say, in one month, that seems like a big number,” Rigdon said.

Rigdon also said he had “no reason” to believe that the massive merger will have an impact on Comcast’s negotiations for Turner channels or HBO.

In other testimony late last week, AT&T lead attorney Daniel Petrocelli used statements from Dish Chairman Charlie Ergen to poke holes in Dish programming executive Warren Schlichting’s testimony.   

Schlichting has said an AT&T-Time Warner deal would drive up the price for Time Warner’s Turner Networks-branded channels, thus rendering Dish unable to license a vital programming resource. But Petrocelli reminded the court that Ergen – while speaking during a third-quarter 2014 Dish earnings call – referred to the looming specter of Dish potentially losing access to Turner channels as a “non-event.”  

With Dish and Turner at an impasse at the time on talks for a carriage licensing renewal, Ergen noted that Turner’s flagship cable news channel, CNN, wasn’t even ranked in the top 10 at the time in terms of viewership. 

“If we’re not going to be in a relationship with Turner, then we would not have to raise our prices next year,” Ergen said at the time. “That would be slightly cash positive for us from a cash flow perspective.” 

Ergen also referred to Turner’s bundle – which includes TNT, TBS and Cartoon Network – “one of the easier ones to take down.”