Court rules DirecTV can't drop Ovation and Reelz

Wading through a merger deal that was made 15 years ago, a Minnesota federal court has ruled that DirecTV (NASDAQ: DTV) cannot drop lightly watched channels Reelz and Ovation TV.

According to the U.S. District Court ruling, which was obtained by The Hollywood Reporter, the company that owns those two networks, Hubbard Broadcasting Inc. (HBI), has a "continuous right" to have three channels on the DirecTV platform, as long as its demanding reasonable carriage terms.

The matter dates back to 1999, a more nascent era of satellite-based pay-TV distribution, when a younger, smaller DirecTV paid $1.3 billion to acquire Stanley Hubbard's United States Satellite Broadcasting (USSB). Hubbard's satellite service had carriage agreements in place with premium channels HBO and Showtime, and DirecTV was looking to limit the competition to Charlie Ergen and Dish Network (NASDAQ: DISH).

Part of that agreement was that HBI would have a three-channel allotment on the DirecTV platform. According to THR, the two sides apparently haggled over the length of that arrangement, with HBI seeking "perpetuity" and DirecTV trying to limit the commitment to seven years. However, no expiration date was ever put into a contract.

"[T]here is evidence that during the merger negotiations, HBI indicated that it would not agree to a merger without a guarantee that the HBI family could remain in the satellite television business for the long term," writes Judge Donovan Frank.

DirecTV responded to THR with this statement: "We are disappointed and disagree with the Court's decision, but we will continue to negotiate in good faith, as we always have, for carriage of the two channels at issue. We are also assessing our appellate options to address the ruling's errors."

Targeted to movie fans, Reelz is currently distributed in about 60 percent of U.S. TV homes. Ovation TV is an arts and culture-focused channel co-owned by HBI and The Weinstein Company. It currently has a market penetration of just under 40 percent.

HBI filed suit against DirecTV in September, fearing the two networks would soon be pulled off the platform. 

For more:
- read this Hollywood Reporter story

Related links:
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Stan Hubbard inducted into CEA Hall of Fame

Time Warner Cable, Bright House to restore Ovation