Univision Challenges New Charter Licensing Fees

     (CN) — Hispanic media company Univision says cable distributor New Charter breached its contract by imposing dramatically below-market license fees for its programming, threatening access to Spanish-language news stations in an election year.
     In May of this year, two of Univision’s largest distributors, Charter Communications and Time Warner Cable, merged in a massive $71.4 billion deal that created the second-largest cable distributor in the U.S.
     Univision claims the resulting company, New Charter, “is now flagrantly breaching Univision’s contract with Charter by using the acquisition as a pretext to unilaterally impose license fees that are dramatically below current market license fees for Univision’s valuable content.”
     Univision is the leading Hispanic media company in the U.S. with 17 cable networks and 59 local television stations. It sued Charter and Time Warner on Friday in New York County Supreme Court.
     Charter allegedly sought to shift blame for the new license fee schedule to Time Warner Cable, claiming that Time Warner Cable is now managing all cable systems for both companies, but Univision isn’t buying it.
     “But everyone knows that is simply not true: the longstanding CEO and the senior executive team of Charter, as well as its preexisting board of directors, now in fact manage and control all such cable systems, and virtually the entire TWC leadership team has departed,” according to the complaint.
     Charter seeks to enforce the terms of a 2009 distribution agreement between Univision and Time Warner Cable, but Univision says that agreement no longer applies because Time Warner Cable no longer controls any of the networks at issue.
     “Charter’s untenable position that TWC now manages all of the legacy Charter systems and legacy TWC systems contradicts dozens of Charter’s public statements, Securities and Exchange Commission filings made pursuant to the federal securities laws, and other regulatory filings,” Univision says. “These statements and filings were made to sell Wall Street investors, shareholders, and regulators on the core argument that Charter’s pre-acquisition leadership and management team would manage all of the systems.”
     Univision’s pre-merger agreement with Charter expired at the end of June 2016, but the company granted Charter a six-month extension as a show of good faith.
     It claims its programming is especially important to Hispanic America in an election year in which Hispanic voters are likely to play a big role in election outcomes.
     But “Univision’s good-faith effort to create time for negotiations proved futile,” according to the complaint.
     “It is apparent that New Charter is resorting to transparently constructed, pretextual arguments concerning the purported structure of the acquisition to shoehorn the legacy Charter systems and legacy TWC systems as ‘systems’ under the TWC agreement, and thus evade its contractual obligations to Univision,” the company claims.
     Univision seeks a determination that its distribution agreement with Charter ends on Dec. 31, 2016, and damages for breach of contract.
     It is represented by Jonathan D. Polkes with Weil, Gotshal & Manges in New York.
     Charter spokewoman Maureen Huff said, “We have a long-term contract with Univision and we expect them to honor it.”

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