Cable companies' contract dispute raises breach of contract

The cable TV giant Cablevision offers cable television service to homes in Illinois.

Cablevision has been involved in a long-standing business contract dispute with one of its industry rivals, Dish Network.

Cablevision attempted to expand and break into the satellite TV industry back in 2003 by offering consumers several high-definition channels through a satellite TV subsidiary. HD channels were a new innovation at the time.

When Cablevision's venture failed, they entered into a business contract for the sale of their fledgling subsidiary to Dish Network for $200 million. However, Cablevision retained the rights to the HD channels that they had developed in their attempt at producing a satellite service.

As part of the terms of the deal, Cablevision would continue to invest a designated amount for programming for these specified channels over a 15-year-period. In exchange, Dish Network agreed to carry the channels during that same time period.

This is the heart of the issue in this business dispute. Dish Network determined that Cablevision failed to spend the required amount on the programming and terminated their contract. However, Cablevision disputes the claim that it breached the contract and says it can produce evidence that it did, in fact, make the necessary investments.

In this breach of contract litigation, a court will now have to decide not only whether Cablevision spent the required amount, but whether that money was required to be spent only on programming under the terms of the contract as Dish Network claims, or whether part of the money could be spent on other expenses in order to maintain the channels, such as for employee compensation.

Source: The Wall Street Journal, "Dolans, Ergen Take Old Spat to Court," Shalini Ramachandran, Sept. 16, 2012

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