Dish: AMC, Siblings 'Devalued' Themselves With Use of Netflix

Consumers Want More Flexibility and Lower Costs

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Dish Network said today that Netflix and other digital video services were a main reason that it had decided to drop a bundle of channels, including AMC.

'The Walking Dead'
'The Walking Dead' Credit: AMC

The satellite giant had said last week that it would stop carrying AMC -- home of "Mad Men" and "The Walking Dead" -- and sibling channels WeTV, IFC and Sundance when their contract expires in June, citing low ratings and their digital availability. AMC connected the move with ongoing litigation between the companies.

Dish Chairman-CEO Charles Ergen elaborated today on the assertion that digital outlets were undermining the AMC channels' value. "Those particular channels are also available to our customers through a variety of other sources, like iTunes, Amazon and Netflix," Mr. Ergen said during Dish Network's earnings call.

The networks "devalued their programming content" by making it available on multiple outlets, he said.

AMC provides Netflix and other streaming video services only with library content; it doesn't make episodes of series available until nearly a year after they appear on TV. Most other cable networks operate the same way.

Mr. Ergen said that Dish subscribers, who skew more rural, don't want to pay more money for cable and that AMC's ratings have "very, very, very low viewership."

AMC countered that "The Walking Dead" is the top scripted drama among Dish subscribers.

The network has been vocal about its view that it is undervalued. It has been seeking about 75 cents a subscriber from cable and satellite companies, which would be a significant increase from the roughly 40 cents in carriage fees that analysts estimate the network receives now.

But Mr. Ergen argued that his customers are resistant.

"Our customers aren't really saying, 'We want to pay more money,' " Mr. Ergen said. "They are saying 'We are more flexible in our programming, and we don't want to pay more.' " He added that "it's not as if something was exclusive."

Last week a judge denied Dish's application to appeal a court decision sanctioning it for bad faith in destruction of evidence in Voom HD litigation dating to 2008.

The case involves the now defunct Voom HD, a subsidiary of Rainbow Media, predecessor to AMC Networks. Dish had terminated its carriage contract, arguing that viewership was low. Voom filed suit, seeking damages of more than $2.5 billion.

"With little prospect of winning a jury trial given the adverse-inference instruction, this may be Dish's only source of negotiating leverage with AMC and Cablevision, but it could backfire if [the judge] perceives this to be only a thinly veiled threat and hence a sign of bad faith," Bernstein Research analyst Craig Moffett wrote in a note.

If Dish Network follows through with its threats, AMC Networks will lose about 10 million potential viewers. It is in about 95 million households.

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