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Commitments And Contingencies
12 Months Ended
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]  
Commitments And Contingencies
Commitments and Contingencies
Commitments
The Company has purchase obligations which consist primarily of program rights obligations that have not yet met the criteria to be recorded in the balance sheet. Future purchase obligations at December 31, 2012, are $188,612 in 2013; $52,819 in years 2014-2015 and $4,595 in years 2016-2017. The Company has guarantee commitments which consists primarily of a guarantee of payments to a production service company for certain production related costs. Guarantees at December 31, 2012, are $71,483 in 2013 and $1,145 in years 2014-2015. The Company has contract obligations which primarily represents participation obligations and deferred carriage fees payable to distributors. Contract obligations at December 31, 2012, are $23,465 in 2013; $22,780 in years 2014-2015 and $2,233 in years 2016-2017.
Legal Matters
DISH Network Contract Dispute
In 2005, subsidiaries of the Company entered into agreements with EchoStar Communications Corporation and its affiliates by which EchoStar Media Holdings Corporation acquired a 20% interest in VOOM HD and EchoStar Satellite LLC (the predecessor to DISH Network) agreed to distribute VOOM on DISH Network for a 15-year term. The affiliation agreement with DISH Network for such distribution provided that if VOOM HD failed to spend $100,000 per year (subject to reduction to the extent that the number of offered channels was reduced to fewer than 21), up to a maximum of $500,000 in the aggregate, on VOOM, DISH Network could seek to terminate the agreement under certain circumstances. On January 30, 2008, DISH Network purported to terminate the affiliation agreement, effective February 1, 2008, based on its assertion that VOOM HD had failed to comply with this spending provision in 2006. On January 31, 2008, VOOM HD sought and obtained a temporary restraining order from the New York Supreme Court for New York County prohibiting DISH Network from terminating the affiliation agreement. In conjunction with its request for a temporary restraining order, VOOM HD also requested a preliminary injunction and filed a lawsuit against DISH Network asserting that DISH Network did not have the right to terminate the affiliation agreement. In a decision filed on May 5, 2008, the court denied VOOM HD’s motion for a preliminary injunction. On or about May 13, 2008, DISH Network ceased distribution of VOOM on its DISH Network. On May 27, 2008, VOOM HD amended its complaint to seek damages for DISH Network’s improper termination of the affiliation agreement. On June 24, 2008, DISH Network answered VOOM HD’s amended complaint and asserted counterclaims alleging breach of contract and breach of the duty of good faith and fair dealing with respect to the affiliation agreement. On July 14, 2008, VOOM HD replied to DISH Network’s counterclaims. The Company believes that the counterclaims asserted by DISH Network are without merit. VOOM HD and DISH Network each filed cross-motions for summary judgment. In November 2010, the court denied both parties’ cross-motions for summary judgment but granted VOOM HD’s motion for sanctions based on DISH Network’s spoliation of evidence as well as its motion to exclude DISH Network’s principal damages expert. DISH Network appealed these latter two rulings. On January 31, 2012, the Appellate Division of the New York State Supreme Court issued a decision affirming (i) the trial court’s finding of spoliation and imposition of the sanction of an adverse inference at trial; and (ii) the trial court’s decision to exclude DISH Network’s damages expert. On February 6, 2012, DISH Network filed a motion seeking leave from the Appellate Division to appeal the order. On April 26, 2012, the Appellate Division denied DISH Network’s motion, thereby precluding any further appeal of the trial court rulings. The stay of the pending trial court proceedings was lifted on May 1, 2012. A trial before the New York State Supreme Court began on September 28, 2012.
On October 21, 2012, VOOM HD and CSC Holdings, LLC ("CSC Holdings"), a wholly owned subsidiary of Cablevision, entered into a confidential settlement agreement and release (the “Settlement Agreement”) with DISH Network, and for certain limited purposes, MSG Holdings, L.P., The Madison Square Garden Company and EchoStar Corporation, to settle the litigation between VOOM HD and DISH Network. On October 24, 2012, VOOM HD and DISH Network filed a stipulation of discontinuance with prejudice with the New York State Supreme Court with respect to the litigation.
The principal terms of the Settlement Agreement are as follows: 1) DISH Network paid $700,000 to an account for the benefit of Cablevision and the Company; 2) Cablevision agreed to sell its multichannel video and data distribution service spectrum licenses in the U.S. to DISH Network; 3) simultaneously with the execution of the Settlement Agreement, DISH Network entered into a long-term affiliation agreement with AMC Network Entertainment LLC, WE: Women's Entertainment LLC, The Independent Film Channel LLC, Sundance Channel L.L.C. and Fuse Network LLC, a subsidiary of The Madison Square Garden Company, that provided for resumption of carriage of all of the Company's networks by no later than November 1, 2012; and 4) an affiliate of DISH Network agreed to convey its 20% membership interest in VOOM HD to Rainbow Programming Holdings LLC ("Rainbow Programming Holdings"), a wholly owned subsidiary of AMC Networks.
In connection with the Distribution, AMC Networks and Rainbow Programming Holdings (collectively, the “AMC Parties”) and CSC Holdings entered into an agreement (the “VOOM Litigation Agreement”), which provides that, CSC Holdings had full control over the litigation with DISH Network and the decision with respect to settlement was to be made jointly by CSC Holdings and the AMC Parties. In addition, the VOOM Litigation Agreement provides that CSC Holdings and the AMC Parties will share equally in the proceeds (including in the value of any non-cash consideration) of the settlement in the litigation with DISH Network. The AMC Parties were responsible for the legal fees and costs until such costs reached an agreed upon threshold, which occurred in the third quarter of 2012, subsequent to which CSC Holdings and the AMC Parties bear such fees and expenses equally.
The allocation of the settlement proceeds between the AMC Parties and CSC Holdings will be determined pursuant to the VOOM Litigation Agreement. The AMC Parties and CSC Holdings agreed that, pending a determination of the allocation of the proceeds, $350,000 of the cash proceeds would be distributed to each of the Company and Cablevision. Accordingly, the portion disbursed to the Company is included in cash and cash equivalents in the consolidated balance sheet at December 31, 2012. The final amount to be allocated to the Company is yet to be determined and may be significantly less than $350,000.
As the Settlement Agreement and the long-term affiliation agreement entered into on October 21, 2012 represent a multiple-element arrangement that includes elements other than revenue, and there is vendor-specific objective evidence of the fair value of the long-term affiliation agreement, which is the only undelivered element of the arrangement, the Company determined that the residual method of accounting is the most appropriate method to allocate the consideration among the disparate elements of the arrangement. Accordingly, at October 21, 2012, the fair value of the affiliation agreement must be deferred and recognized as revenue as the programming services are provided.
Based on the Company's fair value assessment of the affiliation agreement, the affiliation fees payable by DISH Network to the Company from the effective date of the affiliation agreement of October 21, 2012 through December 31, 2013 are below fair value by approximately $31,000 and the affiliation fees payable by DISH Network over the remaining term of the affiliation agreement represent fair value. As a result, the Company recorded the $31,000 excess of the fair value of the affiliation agreement over the contractual affiliation fees as deferred revenue on October 21, 2012, of which approximately $5,000 was recognized as revenue during 2012 as the programming services were provided. The remaining $26,000 is included in deferred revenue in the December 31, 2012 consolidated balance sheet and will be recognized ratably over 2013 as the programming services are provided.
Deferred litigation settlement proceeds of approximately $308,000 is recorded in the consolidated balance sheet at December 31, 2012, which is the result of the $350,000 temporary allocation of proceeds, less the $31,000 of deferred revenue and less an $11,000 receivable related to VOOM HD’s previous affiliation agreement with DISH Network. At December 31, 2012, there is no minimum amount of settlement proceeds that the Company is guaranteed. As a result, no litigation settlement gain, if any, was recognized in 2012 and such gain, if any, which could be material, will not be recognized until realized following the final resolution of the allocation of the settlement proceeds.
Other Legal Matters
On April 15, 2011, Thomas C. Dolan, a director of the Company and Executive Vice President, Strategy and Development, in the Office of the Chairman and a director of Cablevision, filed a lawsuit against Cablevision and RMH in New York Supreme Court. The lawsuit raises compensation-related claims (seeking approximately $11,000) related to events in 2005. The matter is being handled under the direction of an independent committee of the board of directors of Cablevision. In connection with the Distribution Agreement, Cablevision indemnified the Company and RMH against any liabilities and expenses related to this lawsuit. Based on the indemnification and Cablevision’s and the Company’s assessment of this possible loss contingency, no provision has been made for this matter in the consolidated financial statements.
In addition to the matters discussed above, the Company is party to various lawsuits and claims in the ordinary course of business. Although the outcome of these other matters cannot be predicted with certainty and the impact of the final resolution of these other matters on the Company’s results of operations in a particular subsequent reporting period is not known, management does not believe that the resolution of these matters will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due.