Ergen’s past posturing haunts DOJ in AT&T cross-examination of Schlichting

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(Matthew Henry/Burst)

In his second day of testimony in the DOJ’s lawsuit to stop AT&T from buying Time Warner Inc., top Dish Network programming executive Warren Schlichting found himself undermined by comments from his boss that were more than three years old. 

Cross-examining the Justice Department’s witness, AT&T lead attorney Daniel Petrocelli used statements from Dish Chairman Charlie Ergen to poke holes in Schlichting’s core thesis—that an AT&T-Time Warner deal would drive up the price for Time Warner’s Turner Networks-branded channels, thus rendering Dish unable to license a vital programming resource.

According to Variety, which is covering the trial in Washington, D.C., Petrocelli reminded the court that Ergen—while speaking during a third-quarter 2014 Dish earnings call—referred to the looming specter of Dish potentially losing access to Turner channels as a “non-event.” 

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With Dish and Turner at an impasse at the time on talks for a carriage licensing renewal, Ergen noted that Turner’s flagship cable news channel, CNN, wasn’t even ranked in the top 10 at the time in terms of viewership. 

RELATED: Turner chief tells judge there's no incentive to withhold networks from rival distributors

“If we’re not going to be in a relationship with Turner, then we would not have to raise our prices next year,” Ergen said at the time. “That would be slightly cash positive for us from a cash flow perspective.” 

Ergen also referred to Turner’s bundle—which also includes TNT, TBS and Cartoon Network—“one of the easier ones to take down.”

RELATED: Sling TV's Warren Schlichting: AT&T-Time Warner deal may lead to ‘severe bleeding’ of subscribers

For his part, Schlichting tried a little damage control, noting that his boss’ comments had come in the heat of carriage negotiation. Ergen, he said, was simply “negotiating to the press.” 

Petrocelli, however, pressed Schlichting as to whether Ergen was being truthful. Schlichting conceded that he was. 

RELATED: Cox’s Fenwick ‘very concerned’ about ‘horribly ugly’ AT&T-Time Warner deal

The compelling cross-examination came after Petrocelli last week roughed up another DOJ witness, Cox Communications program acquisitions executive Suzanne Fenwick, who was also called upon by the government to testify that AT&T buying a major programming conglomerate would upset the leverage balance in the programming negotiations of rival operators.

Like Schlichting, Fenwick testified that the deal changes the leverage Cox enjoys with Turner. And if Cox lost access to Turner channels, it would lose a “large number” of subscribers.

However, Fenwick was unable to answer Petrocelli’s question as to how many top-ranked shows are produced by TBS, despite listing the Turner network as having “must-have” content. Petrocelli’s hardest hit came when he pinned Fenwick for not researching an estimate on how many subscribers Cox might lose if it couldn’t come to terms with Turner (thus the “large number” estimate).

"You think you can just come in here and give your opinion … and you've never done a single bit of quantitative analysis?" Petrocelli told Fenwick.

Conversely, during the trial Wednesday, Turner CEO John Martin was called by AT&T to the stand and testified that Turner would have no incentive to withhold channels like CNN, TBS and TNT from AT&T’s rival pay TV distributors like Comcast and Dish Network.

“I would like every distributor to carry every network I have and carry it at 100% penetration,” Martin said according to Reuters.

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