Letter leaked from Multichoice shows LTV deal is on shaky ground
PAY-TV viewers, brace yourselves: if you thought that your subscription to Multichoice’s analogue service was guaranteed immunity from the pay-TV wars, wipe that look off your face.
The Cyprus Mail has secured a letter from Multichoice Cyprus’ Managing Director Willem Hattingh to George Xinaris, general manager of LTV.
The letter reveals the behind-the-scenes exchanges between the two former partners and now bitter rivals. It puts into perspective the dispute that has been raging for a month now.
Because of confusion over the spat, it would be useful to consider the sequence of events up to the present day.
Back in June, the Commission for the Protection of Competition (CPC) ruled that the exclusive distribution of LTV’s content on the Multichoice [analogue] platform was illegal. The decision untied LTV’s hands, because it could now furnish its content to any network – analogue or digital.
It’s also worth noting that it was LTV who had taken recourse to the CPC in the first place.
LTV was in talks with the Cyprus Telecommunications Authority (CyTA) for placing its package on the latter’s miVision digital platform. However the move was perceived as a breach of contract by Multichoice, and this jeopardised LTV’s mega deal with CyTA.
On July 7, without warning, LTV terminated its transmission on the Nova Cyprus platform, citing financial differences with Multichoice. LTV said this was caused by the “unreasonable refusal by Multichoice Hellas SA, owners of Nova Cyprus (the company’s satellite platform), to pay them fees due for the months of April and May.”
A few days earlier, Multichoice had added six Supersport channels and the Filmnet channel featuring movies to its Nova Platform at no extra charge.
LTV and Alfa were still available on the analogue Multichoice service, which has some 40,000 subscribers. Nova Cyprus has around 25,000 subscribers.
Multichoice retaliated, accusing LTV of irresponsible behaviour towards its customers. It released a statement that read: “LTV disconnected its signal at prime time, before the start of the Wimbledon match with Marcos Baghdatis and a few days before the European games of the Cypriot football teams.
“Fortunately, through the SuperSport coverage of the Baghdatis match, the match was available to all Nova Cyprus subscribers. That does not, in any way, excuse the conduct of LTV.”
On July 12, CyTA’s miVision platform began transmitting LTV and Alfa.
In the following days, LTV executives urged Nova Cyprus subscribers to switch from their digital subscription to analogue, promising a rebate.
If you’re a hardcore football fan, your other alternative is to get the miVision cable service, but for LTV and Alfa you’ll need to pay an additional £12 a month.
In short, subscribers to Nova Cyprus were left in the cold as far as LTV content is concerned, while subscribers to Multichoice Cyprus (analogue) will continue to enjoy premier movies and European football.
Or will they? According to the letter obtained by the Mail, the renewal of the analogue channels on the Multichoice analogue platform is far from a foregone conclusion.
What does it all mean? An industry insider explained to the Mail:
“Once LTV earned the right to freely distribute its content, instead of lowering the price as one would have expected according to market practices, it did the opposite.
“As you can see from the letter, while all these exchanges were going on, LTV decided unilaterally to cut off its transmission on Nova Cyprus. It said that Multichoice had not paid them fees due. In reality, though, what happened is not that Multichoice refused to pay up –they were merely negotiating a new agreement and waiting for a response from LTV.
“But LTV made it look like Multichoice was cheating. In fact, LTV was lying outright.
“Then, out of the blue, viewers learned they couldn’t get LTV on Nova.”
The source, who did not wish to be named, said that these corporate games were nothing new in the business. But what was worrying, he added, was the utter disregard for paying customers.
“What LTV has done is downgrade the quality of its product, but is still charging the same price. For instance, the package no longer offers the same number of movies as it used to.
“What’s more, miVision subscribers should not take it for granted that they’ll get all the Champions League and Premiership games. This is all being negotiated. Only by September, when the football leagues begin, will the smoke clear.”
Multichoice yesterday said that, no matter how things panned out, it was already working on giving its customers the best value for money.
Commercial manager Elpida Louca told the Mail that, as a first step, the Filmnet channel would go on a 24-hour basis as of August 1, with the addition of Filmnet 3 for the adult zone film.
As far as the ever-popular football goes, the following will be available from the new Supersport channels as of next season: French league, Spanish and German cup games, Greek championship games and the Argentine league.
Other sports broadcasts will include the Euroleague (basketball), the ATP masters series and Wimbledon, World League Volley and the US Open Golf.
Louca said that efforts were underway to secure more football, but could not go into details.
“Unfortunately, it seems LTV is not interested at this time in restoring the LTV service to the Nova Cyprus platform,” she said.
In the meantime LTV has reportedly responded to Multichoice, arguing that the fact its content is now distributed on many platforms does not in any way slash production costs. Therefore, LTV said, Multichoice is unreasonable to ask for a lower price.
In addition to CyTA, telecom providers PrimeTel and AthenaSat are said to be close to clinching a deal with LTV, ensuring that the battle for television will escalate as we head into autumn.
LEAKED TO THE MAIL:
Dear Mr. Xinaris
RE: Analogue Channel Distribution Agreement
SUBJECT TO CONTRACT AND WITHOUT PREJUDICE
On 5 July 2006 I sent you a letter outlining areas which I believe require further discussion along with a full mark-up of the draft analogue Channel Distribution Agreement, to which I have received no reply. Please clarify immediately whether LTV intends to pursue good faith negotiations regarding the analogue distribution of the LTV Channel, as we cannot continue to provide services to LTV without a signed contract. In particular I note that, among other points, no agreement has been reached between our companies regarding the price for the non-exclusive channel.
I also note that I received your letter of 5 July 2006, which I personally received after I sent you my letter and the revised agreement on that same day. My letter of 5 July makes it clear that MultiChoice Cyprus does not, among other points, accept the quality criteria or the financial terms suggested by LTV for the non-exclusive analogue carriage of the LTV channel.
It should be noted that your insistence – on a take it or leave it basis – to price the L TV channel at the previous exclusive level of license fees and without adequate quality guarantees is not accepted by us.
It does not only make commercial sense but it is also logical for a reduction to be provided by LTV to the license fee as the agreement to be concluded is no longer on an exclusive basis.
We understand that the channel is now available elsewhere.
It is obvious that in line with competition policy the non-exclusive fee you charge should be less than what you used to charge on an exclusive basis. Consequently we believe that 1/3 license fee reductions would be
in order giving monthly per subscriber fees of:
* £(XXX) for the stand alone LTV channel plus £(XXX) for the adult zone
* £(XXX) for the stand alone Alfa TV channel, and
* £(XXX) for the combined LTV and Alfa TV channels plus £(XXX) for the adult zone,
plus VAT on all license fees.
We will, of course, pass the license fee reductions on to subscribers who clearly must benefit from the CPC mandated non-exclusive license arrangement. It goes without saying that appropriate retrospective credit will be given to subscribers as of 2 June 2006.
Our obligation to subscribers is to offer the best pay television product at the lowest possible price and what other pay television operators may do is not for us to comment.
In view of the above we look forward to receiving your confirmation on the reduced license fee as well as clarifications requested on, among other points, the quality criteria. This will enable us to proceed as soon as possible and make payment to you against invoices that we look forward to receiving on the basis of a signed contract.
Your immediate reply is requested.
Yours faithfully
Willem Hattingh
Managing Director
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