VOOM vs EchoStar: “Betrayal” alleged

With a jury in place, the $2.3 billion Cablevision/Voom lawsuit against EchoStar/DISH got into its stride on Friday, with Voom’s lawyers  arguing that the its all-HDTV service died because EchoStar reneged on a 15-year carriage agreement it had with Voom’s owners. EchoStar denies the allegation, and argued that its commitment to the agreement hinged on Voom investing $100 million a year on programming for the first five years of the deal. Voom’s case, in essence, is that its all-up programming and related costs easily exceeded $100 million.

In pre-trial documents shown to the court it was made clear that Voom spent almost $103 million on in 2006. However, EchoStar states that this included $12 million of “corporate expenses”.

“This is a simple case of a big company, a sophisticated company, betraying its partner,” Voom HD attorney Orin Snyder said in his opening statement to the court. “My client, Rainbow Media HD, was wronged by EchoStar, which backed out of a contract that lasted 15 years after two years and left my client with massive financial losses.”

VOOM HD was a truly groundbreaking bouquet of an initial 21 all-HD channels, owned by Rainbow Media, a subsidiary of Cablevision. Launched in 2003, EchoStar added the bouquet in April 2005 (and bought the Rainbow-1 satellite from Cablevision as part of the deal). On April 30th 2005 the Cablevision-backed satellite service ceased, and EchoStar’s Dish/Voom service began with 15 channels.

James Bennett, representing EchoStar, focused his opening arguments on what might become a sticky point for Voom, its admission that while Voom was spending “well over” half the $100 million commitment ahead of the carriage agreement being signed, that sum declined substantially shortly after the agreement was signed, in part because Voom parent Cablevision Systems was considering shutting the service down. Bennett added that shortly after the EchoStar deal was signed, Cablevision stopped carrying the Voom channels.

This, in essence, is true given that there was a very public falling out between various members of the controlling Dolan family, and the overall spend – and lack of take-up of HDTV at that time – was hurting Cablevision badly.

However, it also seems that there were plenty of HDTV fans around. Prior to the Voom carriage deal EchoStar/Dish had less than 30,000 high-def subscribers. By January 2008 that had grown to more than 1.3 million.

Charles ‘Chuck’ Dolan is due to take the witness stand on Monday October 1st.

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