Univision Holdings has sued Charter Communications and accused the cable company of attempting to shortchange it on programming fees after acquiring Time Warner Cable, 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 and Dish Network's Sling TV, putting more pressure on the TV industry.
Univision, the largest Spanish-language broadcaster in the U.S., accused Charter of breaching its contract by using the acquisition to impose fees that are "dramatically below" current market prices for the network's content. Charter 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.
"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.
Univision's complaint comes as the 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.
-- Bloomberg News