Stop the Music - Broadcasting & Cable

Stop the Music

EchoStar balks at new channel; Universal Music sues
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Universal Music has filed a suit in federal court charging that DBS company EchoStar breached an agreement to carry its startup international-music channel, delaying its launch. The network was scheduled to debut Jan. 22, but Universal delayed it when EchoStar balked. Universal parent Vivendi is seeking an unspecified amount of cash but, most important, wants to force the company to put the channel on the air.

EchoStar’s Dish Network was a linchpin of the record company’s plans to create the channel, tied to a $1.5 billion investment that Vivendi made in 2001. France-based Vivendi took a $500 million bath on that investment and is finding that its frustration over EchoStar hasn’t ended.

The channel is aimed at fulfilling the dream of many record-company executives: an MTV-like success of their own to showcase their artists. Labels wouldn’t have to fight the programming committees at MTV. And they wouldn’t be competing for scarce airtime as MTV devotes fewer hours to music videos and more to episodes of Road Rules and Pimp My Ride.

U.S. record companies have tried to start similar channels over the years but have been thwarted in part by antitrust issues and by worries that labels would keep the best videos for their own channels or, at least, delay their release to MTV, VH1 or BET.

In the suit, Vivendi describes the channel as music “with a more international flavor.” The channel would blend U.S., Latin, British and other international artists, with hour-long blocks by music genre.

Universal Music hired MTV vet Andy Schuon to run the channel—referred to blandly in the suit as IMF, for international music feed. Schuon was once the head of music programming for MTV and considered a music-industry powerbroker.

Court documents show that the company was rushing headlong to get the channel on-air by Jan. 22. That was the expiration date of the French company’s three-year window to get as many as five precious channel slots that would reach Dish Network’s 10.5 million subscribers.

Spring launch

It would have been a channel started on a shoestring. Vivendi asserts that, as recently as Jan. 3, its executives expected to be on the air on Jan. 22. But the company said last week that programming plans aren’t finalized, no one has yet been hired for the crucial position of shopping the service to cable operators, and a lot of staff needs to be hired.

“We’re still building,” a Universal Music spokesman said. “We’re still producing programming.” The company expects to launch sometime in the spring.

Neither Schuon nor EchoStar would comment.

Vivendi thought it had secured channel slots when it bought 10% of EchoStar in 2001. That $1.5 bil­lion investment came when the French company’s then-CEO Jean Marie Messier was still in the throes of a media-buying frenzy, dumping billions into companies like USA Network, Universal Studios and French pay movie network Canal Plus.

The investment gave Vivendi the rights to launch up to five channels. Plans included an action/suspense channel, videogame channel, movie channel and “generation/music channel.” Vivendi would be able to charge 10¢ per month for each.

Vivendi soon found itself gripped by a financial scandal and started selling assets. The company sold the stake back to EchoStar in December 2001, for just $1 billion, booking a $500 million loss.

Vivendi sold the Universal TV and movie operations to NBC last year but kept Universal’s record company and the carriage rights. Last September, the company notified EchoStar that it intended to launch three channels, all of them music-related services.

EchoStar’s top programming negotiator, Executive Vice President Michael Schwimmer, said the company wasn’t obligated to carry the channel. The lawsuit does not detail precisely why EchoStar refused.

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