Voom HD Networks - History

History

The Voom HD Networks were originally part of the Voom DTH satellite platform launched by Cablevision and were operated by its subsidiary, Rainbow DBS Company. The original Voom DTH was primed as a competitor to the established DirecTV and Dish Network systems, with its goal to become the first television provider with a lineup consisting mainly of high-definition TV networks. As part of this endeavor, Voom launched in 2003 twenty-one original channels that were completely in HD.

Service was broadcast via the Rainbow-1 communications satellite, which was built by Lockheed Martin and launched on July 17, 2003. It continues to operate from the 61.5°W orbital location, over the Atlantic Ocean.

In early 2005, Voom's parent company Cablevision announced it would seek "strategic alternatives" for Rainbow Media Enterprises, the business unit that contained its Voom satellite service, leaving the future of Voom in question. Cablevision's board proceeded to shut the Voom satellite service down: The satellite service ceased on April 30, 2005, and Rainbow-1 and VOOM's spectrum allocations were sold to EchoStar.

Work on the Voom HD channels continued. In April 2005, Rainbow Media and Dish Network entered into a 15-year affiliation agreement whereby EchoStar’s Dish Network obtained the right to distribute the Voom channels until 2020 and agreed that it would pay Rainbow Media monthly subscription fees for the life of the agreement. The subscription fees started at $3.25 per subscriber in the first year of the agreement, and were to increase to $6.43 per subscriber by the year 2020. In a separate agreement, EchoStar’s Dish obtained a 20% ownership interest in Rainbow Media (the business unit that contained the Voom HD channels) and Rainbow agreed to invest $100 million into the Voom service each year for the first five years of the agreement. As a result, EchoStar's Dish Network announced that they would be adding ten of Voom's original 21 channels to their lineup starting May 1; the remaining channels were added on February 1, 2006.

Upon launch, the Voom HD channels were very well received and EchoStar’s HD subscriber base expanded from about 20,000 at the end of 2005 to about 1.3 million at the end of 2007.

In addition to being carried by Dish Network, the HD channels were relaunched by Rainbow Media under the name "Voom HD Networks." Due to issues surrounding the formatting of the channels, fifteen of the 21 original channels were initially retained. Voom's HD collection was added to Cablevision's cable-TV HD-lineup in late June 2007.

In January 2008, EchoStar's Dish Network abandoned the affiliation agreement claiming that Voom had failed to invest $100 million in the service during 2006. Even after Cablevision and Rainbow provided Dish Network with the financial statements documenting their compliance with the spending provision in the agreement. Dish Network proceeded to remove ten of the channels from their lineup on May 12, 2008, with the remaining five removed the next day, leaving coverage limited to Cablevision's systems in New York, New Jersey, Connecticut and parts of Pennsylvania. Cablevision and Rainbow sued Dish Network for breach of contract and sought more than $2.5 billion in damages. Citing this drop in carriage and the ensuing lengthy litigation, Cablevision announced on December 18 that the Voom HD suite would be discontinued as of January 15, 2009, to be replaced by other HD programming. (Ultimately, the channels ceased operations on January 20, and were replaced by multiplexed HD content from premium providers.)

Following the litigation discovery process, the Court granted Voom's motion for discovery sanctions. The New York State Supreme Court found that EchoStar's Dish Network "systematically destroyed evidence" in the case and stated that “it is entirely possible that the documents destroyed by EchoStar demonstrated that EchoStar knew all along that there was no breach...and would prove Voom’s case.” The Judge also stated that he would tell jurors that Dish Network destroyed evidence and that the jury may assume the evidence would have been helpful to Voom’s case.

According to Sanford C. Bernstein analyst Craig Moffett in a recent Wall Street Journal article, "cases involving spoilation of evidence rarely go to trial because the odds are so skewed against the offending party." In this case, the judge won't only tell the jury that EchoStar failed to preserve certain evidence; he is barring Dish from calling its expert witness to testify on damages.

Additionally, the Court stated in its November 3, 2010 ruling: “In conclusion, the court notes EchoStar’s pattern of egregious conduct and questionable – and, at times, blatantly improper – litigation tactics. EchoStar’s spoliation in this action, and the fact that it has been sanctioned for spoliation in previous actions, is precisely the type of offensive conduct that cannot be tolerated by the court. Similarly egregious is EchoStar’s last minute finagling with expert reports, believing that it can play fast and loose with the rules of procedure in order to enhance its litigation posture.”

The trial commenced on September 19, 2012 in the New York State Supreme Court. During the summer of 2012, financial analysts who cover Dish Networks urged the company to settle the lawsuit in advance of the trial, as “the odds would…appear to be heavily in Cablevision’s/AMC’s favor.”

On October 21, 2012, Cablevision and AMC Networks announced that they have settled their legal disputes with Dish Networks over Voom HD, an indirect subsidiary of AMC Networks. Dish will pay a settlement of $700 million to Cablevision and AMC Networks, $80 million of which will go for the purchase of Cablevision's multichannel video and distribution licenses in 45 U.S. metropolitan areas.