Disney, EchoStar Battle Heats Up

The ghost of battles past is haunting a new fight between The Walt Disney Co. and a large distributor of its programs.

In a court filing this week, EchoStar Satellite Corp. claims Disney threatened to fight its proposed merger with DirecTV if EchoStar dropped Disney's ABC Family and ESPN Classic channels from its Dish Network by the end of the year.

According to court papers filed Thursday, Disney Senior Vice President Peter Murphy told an EchoStar official the company would "march on Washington, D.C." to oppose the merger between EchoStar Communications and Hughes Electronics Corp., which operates DirecTV, if a deal could not be reached.

The charges raise the specter of Disney's aggressive opposition to the merger of AOL and Time Warner. That campaign came on the heels of a dispute with Time Warner Cable during which the cable company pulled the ABC Television network from 3.5 million homes around the United States for a day and a half when negotiations between the two companies for retransmission rights broke down.

A Disney subsidiary, International Family Entertainment Inc., sued EchoStar earlier this month and asked a Superior Court judge to prevent EchoStar from dropping the channels on Jan. 1.

Disney claims EchoStar is using the threat as a negotiating ploy to lower fees charged for its channels. Disney also owns the ABC Television network, ESPN, the Disney Channel and has interests in Lifetime and other cable networks.

In court papers filed Thursday, EchoStar said it needed to drop certain channels in order to accommodate 250 others that the law will require it to carry beginning in January.

On Friday, Disney fired back with a court filing of its own, blasting the claim and saying that EchoStar has more than enough capacity, with more to be added through a fifth satellite scheduled for launch in the next few weeks.

Disney also said Friday it is concerned about EchoStar and DirecTV's "potentially monopolistic merger" and that EchoStar's decision to drop channels in order to exact lower licensing fees "proved our concerns to be valid."

Disney said the EchoStar court papers "materially misrepresent" the conversations between Murphy and Michael Schwimmer, vice president of programming at EchoStar.

EchoStar has said it is dropping the channels because their poor ratings do not justify the fees Disney is charging.

EchoStar told Disney it is exercising a clause in its agreement that allowed it to drop the channel if there was a major change of ownership.

In its latest court filing, EchoStar said it had initiated a lawsuit designed to drop the Family Channel several years ago when the network, owned by evangelist Pat Robertson, was sold to a partnership formed by Rupert Murdoch's News Corp. and Saban Entertainment and renamed the Fox Family Channel. That lawsuit was pending when Disney announced its deal to buy the network.

EchoStar also said it was not interested in getting Disney to drop its fees. Instead, it needed to make room for local channels the service is required to carry under new federal regulations.

The company said it was also concerned about Disney's plans to rebroadcast shows that originally aired on ABC on the new ABC Family channel. EchoStar said it objected to essentially paying for the same programs twice.

It is not known if a judge will rule on Disney's request before Jan. 1.

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