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Optus has found itself in hot water, as various Hollywood movie studios have launched legal action against the company for breach of contract.
According to an Australian Financial Review article entitled Studios pursue Optus in pay TV drama, Warner Bros, MGM, Disney, and Village Roadshow are suing the telco for ‘damages and failing to pay an estimated hundreds of millions of dollars owed to MNC under their supply company.’
According to the report, when Optus renegotiated a channel-sharing agreement with MNC in 1999, Optus has agreed that if it increased its charge to its subscribers, the additional revenue should be shared 50:50 between Optus and MNC.
MNC also said that its revenue sharing agreement with Optus ‘extended to any revenue earned where the telco bundled its telephony and internet services with pay TV – which was the only way Optus sold pay TV following its alliance deal with Foxtel.’
Foxtel took over an estimated $600 million worth of Optus programming liabilities to the Hollywood studios and other program providers and allowed the groups to share content. And since various packages are worth over $150 per subscriber, the damage claim could equate into millions of dollars.
After an agreement struck by Optus with the studios in 1999 regarding a cost per subscriber (CPS) increase, the MNC warned Optus about the price cap issue in 2004, when MNC exercised an option to extend the 1999 agreement until mid-2009. However, MNC claims that Optus has ignored or rejected the claim.
In the article, an Optus spokesperson said: “As with most businesses, from time to time, third parties will raise various disputes in relation to business activities. Unfortunately, at times these can’t be resolved without legal proceedings, and Optus is required to defend claims made. Optus regards this case as an unjustified grab for cash and we are vigorously fighting it.”
