MSM Discovery moves court against Viacom18

MUMBAI: For MSM Discovery, it is a sweet deal gone sour for no fault of theirs. After getting a termination notice from Viacom18, the distribution company operating under the OneAlliance brand has moved the Bombay High Court.

MSM Discovery‘s grouse is that Viacom18 has decided to pull out its four channels - Colors, MTV, Nick and Vh1 - before the expiry of a three-year contract effective 1 April 2009.

"We have moved the Bombay High Court. We believe we have a strong case and will get relief from the court," MSM Discovery president Rajesh Kaul tells
MSM had entered into a pact to distribute Hindi general entertainment channel Colors while renewing its contract to distribute the other three channels. The company had agreed to pay a minimum guarantee (MG) of Rs 3 billion over the three-year period, according to sources familiar with the transaction.

Colors was to turn pay from 1 April and decided to align with TheOneAlliance bouquet. Besides getting a lucrative MG, it also weighed in the fact that the bouquet would have Max as a driver channel with its compelling IPL content during the 45-day period starting 18 April. Colors ran less risk of being blacked out from cable TV networks as it initiated the process of collecting pay-TV revenues.

For TheOneAlliance, the inclusion of Colors, the second most-watched Hindi GEC then, meant more muscle to the bouquet even after the end of the Indian Premier League (IPL) playing window. It was, in other words, a deal that best suited each other at that time.

“We have a watertight contract valid till March 2012. We have been fulfilling all the contractual obligations and there is no way the Viacom18 channels can walk out of our bouquet. There is no material breach on our side,” Kaul says.

When contacted, Viacom18 spokesperson refused to comment on the issue. 
Viacom18 has decided to shift its channels to Sun18, a newly formed joint venture between Sun Network and Network18 that hopes to start with the distribution of 33 channels. Network18 Group has a 50 per cent stake in Viacom18 (through IBN18), the remaining half being held by partner Viacom.

Media observers feel Viacom18 will be able to get more than what it would have got from TheOneAlliance, now that Colors has established its success. "Colors is an established channel now. The revenue potential of Viacom18 from subscription is bright," says an analyst who is tracking the company.

On the other side of the boundary, Star India has plenty of reasons to be upset as the Network18 group of channels (including CNBC TV18 and CNN IBN) have demanded exit from Star Den. Star had formed a 50:50 joint venture with Den Networks in January 2008 and the Network18 channels had signed a long-term distribution contract with Star Den.

"This is the first time in the distribution business that a broadcaster has terminated its contract with the distribution service provider before the full term is over. This will create a lot of ill-feeling in the market," says a senior executive of a leading distribution company who did not want his name to be revealed.

Network18 officials did not want to comment on the issue, including the possibility of material breaches committed by the distribution partner.

The formation of Sun18 marks the entry of Network18 Group into the Indian television distribution space. In an official statement announcing the joint venture, Sun18 had said it would be the "first truly pan-India distribution company" and aim at "becoming one of the dominant players in the approximately Rs 160 billion pay-TV subscription market over the next 2 years."

MSM Discovery is not amused. "Wait and watch. The game is not over yet. We will fight till the end," says Kaul.

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