Court smacks down USA
McMahons win suit to move WWF programming to Viacom-CBS' TNN
By John M. Higgins -- Broadcasting & Cable, 7/2/2000 8:00:00 PM
USA Network was generally right on the law but is nevertheless losing its top-rated World Wrestling Federation Entertainment programming because it mishandled a response from rival Viacom CBS.
That was the ruling of a Delaware state chancellor in flattening USA's suit to keep the WWF's smash hit shows from moving over to TNN and MTV.
USA will now lose shows that frequently generate Nielsen cable ratings of 6.0 and higher, almost triple the viewership of the rest of USA's schedule. That ratings adrenaline will now go to the moribund TNN, which is starving for strong programming.
USA Cable President Stephen Chao insisted the loss of the WWF would have no material financial effect on USA Network, largely because USA gets only 20% of the ad time from WWF shows. But he also insists that the loss will do no major harm to USA's Nielsen ratings, which is less logical given the WWF's towering ratings and the effort Chao and USA Networks Chairman Barry Diller expended to keep them.
A matching clause in WWFE's deal to license its shows to USA was at the center of the trial.
Under USA Network's existing WWF deal, which expires in September, Diller has the right of first refusal to match any competing offer for the rights. Diller's problem is that Viacom-CBS' deal is wide-ranging, combining cash with bits and pieces plucked from their vast combined media holdings.
Aside from the basic agreement to put WWF's matches on CBS'TNN and moving one show to MTV, the deal includes things like a book deal, a 13-episode commitment by UPN to air a WWF-produced drama, plus promotion on radio and billboards.
USA Network executives countered that all they had to match were terms for licensing of the WWF series themselves. They literally crossed out the parts of the Viacom-CBS offer letter they didn't consider "pertinent" and sent it back to Linda McMahon.
"These properties are beyond the subject matter of our prior agreements and our rights of first refusal..USA Network has no obligation to meet those unrelated portions of the CBS-Viacom offer," wrote Richard Lynn, USA Network's senior vice president of business affairs.
Lynn was correct, Chancellor William Chandler ruled, rejecting the Viacom-CBS and WWFE contention that USA had to match the whole package. He said the contract limited matching rights to things directly affecting the TV shows.
But he also ruled that that's where USA executives blew it. Although they matched cash terms of around $500,000 a week, they didn't match other pertinent elements of the Viacom-CBS deal. TNN agreed to never pre-empt WWF's Monday-night Raw Is War show, something USA did to cover U.S. Open tennis and the Westminster Kennel Club show, tremendously annoying the McMahons.
USA didn't match that provision. USA also didn't unconditionally match Viacom-CBS' agreement to distribute the WWF in Canada and the Caribbean or to promote the shows through radio and billboard advertising.
Sounds minor in the scheme of things, but Chandler ruled that USA had to match the pertinent part of the Viacom-CBS deal precisely and unconditionally.
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