Dish Network 2004 Annual Report Download - page 125

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
Vivendi
In January 2005, Vivendi Universal, S.A. (“Vivendi”), filed suit against EchoStar Communications Corporation in
the United States District Court for the Southern District of New York alleging that we have anticipatorily
repudiated or are in breach of an alleged agreement between EchoStar and Vivendi pursuant to which we are
allegedly required to broadcast a music-video channel provided by Vivendi. Vivendi’s complaint seeks injunctive
and declaratory relief, and damages in an unspecified amount. Vivendi has since filed a motion for a preliminary
injunction, in which it asks the Court to order us to broadcast the Vivendi music-video channel during the pendency
of the litigation and to pay Vivendi for the provision of its music-video channel. We intend to vigorously defend
this case. In the event that a Court determines that Vivendi is entitled to a preliminary injunction, we may be
required to broadcast the Vivendi music-video channel during the pendency of the litigation, which would impact
the bandwidth that we have available to broadcast other services. In the event that a Court ultimately determines
that we have a contractual obligation to broadcast the Vivendi music-video channel and that we are in breach of that
obligation, we may be required to broadcast the Vivendi music-video channel and be subject to substantial damages.
It is not possible to make a firm assessment of the probable outcome of the suit or to determine the extent of any
potential liability or damages.
Fox Sports Direct
During June 2004, Fox Sports Direct (“Fox”) sued us in the United States District Court Central District of
California for alleged breach of contract. During October 2004, we reached a settlement with Fox for an immaterial
amount.
Other
In addition to the above actions, we are subject to various other legal proceedings and claims which arise in the
ordinary course of business. In our opinion, the amount of ultimate liability with respect to any of these actions is
unlikely to materially affect our financial position, results of operations or liquidity.
Reauthorization of Satellite Home Viewer Improvement Act
We currently offer local broadcast channels in approximately 155 markets across the United States. In 38 of those
markets, two dishes are necessary to receive all local channels in the market. SHVERA now requires, among other
things, that all local broadcast channels delivered by satellite to any particular market be available from a single dish
within 18 months of the law’s December 8, 2004 effective date. Because we had planned to transition all local
channels in any particular market to the same dish by 2008 rather than in the shorter transition period mandated by
SHVERA, satellite capacity limitations may force us to move the local channels in as many as 30 markets to
different satellites, requiring subscribers in those markets to install a second or a different dish to continue receiving
their local network channels. We may be forced to stop offering local channels in some of those markets altogether.
The transition of all local channels to the same dish could result in disruptions of service for a substantial number of
our customers, and our ability to timely comply with this requirement without incurring significant additional costs
is dependent on, among other things, the successful launch and operation of one or more additional satellites. It is
possible that the costs of compliance with this requirement could exceed $100.0 million. To the extent some of
those costs are passed on to our subscribers, and because many subscribers may be unwilling to install a second dish
where one had been adequate, we expect that our subscriber churn could be negatively impacted. It is too early to
make a firm determination of the cost of compliance.
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