New AT&T Would Have Motive, Means to Try to Crush Dish, Sling's Schlichting Says

Negotiating for Turner content with New AT&T would put Dish Network between a rock and a hard place -- either accept onerous programming terms and rates or lose must-have programming, meaning subscribers likely would will defect to AT&T's DirecTV. So testified Sling TV President Warren Schlichting Monday in U.S. v. AT&T and Time Warner. Meanwhile, U.S. District Judge Richard Leon of Washington raised the specter of contempt of court charges after admonishing counsel on both sides to ensure witnesses who aren't experts aren't made privy to testimony of other witnesses.

Schlichting testified about the must-have nature of much of Turner's programming and the changed motivations Turner would have in negotiations under New AT&T, as did Suzanne Fenwick, Cox Communications vice president-content acquisition, on Thursday (see 1803220033). Dish and Turner now have each other "in a mutual head lock," but that changes radically under New AT&T, Schlichting said. He said it would be more lucrative for New AT&T to gain subscribers at Dish's expense than whatever it would get from higher programming fees, meaning New AT&T would have no motivation to budge from whatever first offer it makes in talks.

Schlichting said the threat of a blackout of such must-have video content "is like having a heart attack. You're never quite all the way back to where you were." He said he also could see New AT&T using its increased leverage to force Dish's Sling TV to add many more Turner networks, which in turn would force the virtual MVPD to face similar demands from other programmers and eventually see its streaming skinny bundle business model broken.

Schlichting also was dismissive of the baseball-style arbitration and no blackouts offer Turner made to MVPDs (see 1711280063), saying the all-or-nothing nature of such arbitration runs the risk of breaking Sling's business model, but Sling couldn't negotiate separately without the leverage that comes with Dish's many more subscribers. That the offer doesn't cover HBO "scares" him, Schlichting said, since the premium network could easily be used as "a hammer" to effect arbitration.

Much of the morning and early afternoon at the trial was taken up with counsel for the two sides in sidebar conference with Leon over what the judge later said was a transcript of Thursday's opening argument and testimony wrongly given to Schlichting by third-party counsel. He said DOJ notified the court Sunday of the violation of witness rules. "It was a mess up by counsel and they've apologized for it," Leon said. He didn't specify what third-party counsel was at fault. Leon said any further such violation would mean the witness would be struck. Treatment of confidential business information has been a constant issue leading up to the trial (see 1712280013 and 1803190023). DOJ asked to have some of Schlichting's testimony in closed court because of its confidential nature. Leon said he'll decide the issue Tuesday.