Disney, Dish Network Battle Over Fees For High-Def Channels

Subscribers to Dish Network Corp.'s (DISH) satellite television service have lost access to four high-definition channels owned by the Walt Disney Co. (DIS) as the two companies reached an impasse in negotiations over carriage fees.

Dish lost signals for ESPNews HD, Disney Channel HD, Disney XD HD and ABC Family HD early Tuesday. The standard-definition version of each network was still available on the satellite service, and the dispute doesn't affect any channels showing games from the FIFA World Cup.

Dish said Disney has asked for steep fee increases in return for access to the four high-definition channels, and Disney said Dish never had a deal to carry the channels and that it should be compensated for them.

The standoff marks yet another instance of carriage fee negotiations between a media company and a major distributor resulting in a programming blackout for consumers. Pay-TV providers like Dish are facing increasing demands for per-subscriber fees from cable and broadcast networks as advertising revenue has slumped amid the economic downturn and the rise of digital media.

Satellite and cable companies have resisted such demands to avoid losing profit margin or raising prices for their subscribers, and the result has been a series of public standoffs in the TV industry, with threats of blackouts attracting the attention of lawmakers and regulators.

Over the past year, Cablevision Systems Inc. (CVC) has endured programming disruptions during bitter carriage-fee disputes with Scripps Networks Interactive Inc. (SNI) and Disney's ABC Broadcasting. Meanwhile, Time Warner Cable Inc. (TWC) barely avoided a blackout from News Corp.'s (NWS, NWSA) Fox Broadcasting in a year-end negotiation that was widely viewed as setting a precedent for the broadcast industry's efforts to garner subscription revenue from distributors.

News Corp. owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal.

The latest negotiation between Dish and Disney differs from the other disputes in that it involves high-definition channels only. Dish and satellite rival DirecTV Group (DTV) recently waived extra subscriber fees for high-definition programming in an attempt to sweeten their offerings and keep their products competitive with each other and the cable and telecommunications companies.

"Dish Network offers all customers 'HD Free for Life,' which is possible because we are committed to negotiating fair contracts that allow us to keep our prices low," Dish said in a statement. "That is why we could not agree to the significant fees requested by Disney and ESPN Networks for the HD feeds of Disney East, Disney XD, ESPNews and ABC Family."

For its part, Disney cited a March court ruling in a lawsuit Dish filed against the company in 2008 alleging the media giant breached its distribution contracts by failing to provide high-definition feeds of the Disney Channel, ESPN News, Toon and ABC Family without additional compensation. The New York court ruled that Dish owes Disney approximately $65 million under the applicable affiliation agreement--a ruling that Dish is appealing.

"The recent New York State Court ruling confirms our position that Dish Network is not entitled to carry ABC Family HD, Disney Channel HD, Disney XD HD and ESPNews HD without paying compensation," Disney said in a press release. "We hope that Dish will work with us to reach an agreement so that we can make these HD networks available to their customers."

-By Nat Worden, Dow Jones Newswires; 212-416-2472; nat.worden@dowjones.com

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