Bell moves to remove fault on Rogers for not knowing about non-compete restrictions
By Ahmad Hathout
The president of content sales at Warner Bros. Discovery (WBD) allegedly told the U.S. content producer’s deal representative to continue negotiating with Rogers despite being told that the company had an outstanding non-compete agreement with Bell that allegedly prevented it from negotiating a licensing deal with a competitor for two years beyond the existing deal’s expiry on January 1, 2025.
“Between May 2023 and August 2023, I had understood that David Decker effectively said … continue negotiating without being concerned about the non-compete agreements, right?” said an examiner for Bell during a deposition.
“Yeah, that is fair to say, yes,” Elliott Wagner, WBD’s senior vice president of international content distribution and partnerships, allegedly said in response, which is now being used as evidence in Bell’s allegation that WBD deliberately broke the non-competition agreement between the two.
WBD representatives were also allegedly communicating with both Rogers and Bell simultaneously, which Bell claims violates Bell’s right to first negotiation on a renewal to a 30-year-old agreement for the programming rights to the premium content.
Bell on Thursday asked the court to amend its complaint to remove claims of relief from Rogers, after a co-negotiator from the cable giant said in an affidavit that WBD allegedly withheld from Rogers the fact it had non-compete covenants with Bell before it signed a blockbuster multi-year deal for Discovery programming on May 31. The latter claim was allegedly confirmed by Wagner himself, according to Bell’s filing.
“Bell Media was astonished to learn that Warner Bros. Discovery had kept Rogers in the dark about critical information when negotiating their licensing agreement for 2025,” a Bell Media spokesperson said in an emailed statement. “Considering this, we can confirm that our efforts are now focused on Warner Bros. Discovery’s breaches to its long-standing agreement with Bell Media. While we will no longer be pursuing an inducement claim for damages against Rogers, we will continue to vigorously enforce our non-compete rights against Warner Bros. Discovery and will ensure that Rogers is also required by the court to respect those rights.”
A Rogers spokesperson told Cartt that, “Bell has abandoned all claims against Rogers because they recognize we did nothing wrong. But they’re still asking the Court to block Rogers from broadcasting – and prevent Canadians from watching – the Discovery channel for two years, so we’re fighting to make sure Canadians can continue watching the programs they know and love.”
WBD’s filing is not in the public record, the full verison of which was provided to Cartt as of late last week, and a rep for the company had previously told Cartt that the organization will not be speaking publicly on the matter. When asked again for a comment on Tuesday, the rep said the company has “nothing to add.”
At least some of the legal wrangling, then, must be gleaned from Bell’s submission. To understand it, it makes sense to go back 30 years for context.
In 1994, WBD’s predecessors and Bell formed a joint venture called Discovery Channel Canada to satisfy CRTC rules to bring the U.S. programming north of the border. The parties expanded into two more joint venture corporations in 2001 to operate Animal Planet and Discovery Science. These joint ventures – of which Bell owns 80 per cent and WBD owns 20 – allow Bell to use the Discovery programming trademarks and content on regular linear television in Canada.
Bell said it has built a considerable loyal audience at significant expense over those years, so a competitor having the ability to take that from it overnight is why it wanted a two-year immunity provision that kicks in after the expiry of the licensing rights so it could transition and ultimately retain that audience by having the time to re-develop the programming into new brands. Because, as Bell puts it, the audience will follow the content.
And Discovery Canada Services have been Bell’s most successful linear televisions series, the broadcaster has said.
At risk, in monetary terms according to Bell, is the joint venture’s approximately $55 million and $75 million in annual advertising and subscriber revenue, respectively. The joint venture corporations have around 10 million subscribers across their linear channels, Bell said.
Bell is alleging that WBD’s deal with Rogers violates section 9.1 of the Discovery Canada Agreement, which prevents the supply of programming to a “similar service” (i.e. Rogers).
Here’s the exact language:
“Neither [the Bell JV Shareholders] nor [the WB JV Shareholders], nor any of their respective Affiliates, shall directly or indirectly file, or support or participate in the filing of, an application to the CRTC for a licence for Canada for a programming service (a “Similar Service”) which is the same as or substantially similar to the Service (as it exists on the date such party ceases to be a Shareholder), or be engaged directly or indirectly in operating a Similar Service in Canada, or directly or indirectly supply programming to a Similar Service in Canada, for as long as such party or any of its Affiliates is a Shareholder of the Corporation and for a period of two years following the date on which such party or its Affiliate ceases to be a Shareholder, unless such Shareholder, or an Affiliate of such Shareholder, acquires all of the Shares of the other Shareholder or purchases all of the assets of the Corporation.” (Emphasis added by Bell.)
The contention, it appears, is when the two-year non-compete period applies. Way back when the joint venture was formed, the WBD predecessor obtained what’s called a “put right,” which gives it a right, but not an obligation, to force a sale of its shares in the venture to Bell.
According to Bell, the restrictive covenants uncontroversially exist so long as the parties remain shareholders in the joint venture and for two years against an existing shareholder following its exit from the pact.
But according to Bell’s application, the American firm will try to leverage the provision to say that the restrictive covenants only apply if it leaves the joint venture – not as long as it remains in it.
WBD, in other words, may believe it can delay or not exercise that put right and avoid triggering the non-compete provisions, Bell alleges.
“This highly technical and decontextualized interpretation would not only run counter to the express language in the provision, but also to the intended purpose of a non-competition provision,” Bell said in its application. “It would produce the commercially absurd result that the Court must avoid when interpreting a contract between two sophisticated commercial parties.”
Bell’s complaint alleges that WBD has “acknowledged that it does not know when it will trigger its put right to sell its interest in [the joint venture] to Bell, nor how long that process will take.”
Bell also argues that another contention with the provision is the term “similar.” It argues that Rogers’s proposed new Discovery and MotorTrend (Discovery Velocity) channels are similar services, citing various comments made by Rogers’s Michael Goldsmith, senior director of business affairs at Rogers Media and co-negotiator on the deal, in the aforementioned affidavit.
Those comments include Rogers wanting the WBD rights because of its popularity in Canada, with Bell’s interpretation being that it would want to deviate as little as possible from it, thus making it similar.
“The only possible conclusion that can be drawn from the evidence is that WBD and its affiliates have agreed to supply programming to a service that is, at a minimum, substantially similar to Discovery Channel Canada,” Bell says in its complaint. “To the extent that Rogers broadcasts a linear channel airing the US primetime content shown on MotorTrend, it will be the same as or substantially similar to Discovery Velocity.”
Because the deal came during the “upfront” season, when broadcasters pitch advertisers their programming so they can lock in advertising slots, Bell said the announcement on June 10 that Rogers and WBD had struck a deal on a licensing deal “damaged Bell Media’s ability to attract advertisers for the upcoming television season.”
The months leading up to the lawsuit
The following is what Justin Stockman, Bell Media’s vice president of content development and programming, alleges happened in an affidavit documenting the months leading up to the Rogers-WBD announcement on June 10, 2024.
It was July 2023 when Pat DiVittorio, then-general manager of Discovery Networks Canada, sent an email to Elliot Wagner, senior vice president of international content distribution and partnership at WBD, about renewing the Bell deal.
DiVittorio informed Stockman sometime later that she and Wagner had a phone conversation in which Wagner allegedly said WBD would make a renewal proposal in due time.
But two months later, in September, Wagner came back and told Stockman and DiVittorio that WBD would like Bell Media to make the first proposal, which Wagner allegedly said should include Bell taking on full management of the Discovery+ streaming platform in Canada.
Things allegedly changed again in October 2023, when at a television trade show in Cannes, France, Stockman said he met with David Decker, president of content sales at WBD. Decker allegedly told Stockman that WBD still expects to operate the Discovery+ streaming platform in Canada, but that it wants Bell running that content concurrently on its own streaming service.
Despite saying it didn’t have full guidance, Stockman said Bell prepared a preliminary proposal – including exclusive rights for the joint venture corporations to use U.S. Discovery content – and sent it to Wagner the next month.
Another two months passes when, in late January 2024, Wagner allegedly sent the Bell team an entirely new proposal, with a different set of rights, brands and structure than had previously been discussed. For example, Stockman said the new proposal, which was allegedly double the price, excluded non-Discovery content, which was most of the content on the Discovery+ service.
When Stockman and DiVittorio asked about the change in tune in January, Wagner allegedly told Bell that it could either take full control of Discovery+ or it would have no streaming rights at all. Another email from Wagner in February laid out that Bell’s original proposal “focused on the limited linear content supply, and did not capture the value of new and library programming across new and existing digital platforms.”
Then later that February, Wagner sends Stockman an email about a counterproposal from Bell:
“You made clear that Bell has no intention or willingness to take on additional linear channels so let us know if the [Discovery+] approach is something you would like to pursue and when you will be able to return a formal counter. I am happy to discuss any remaining questions or concerns that will help move the process along. I appreciate that the timing is not ideal given all the internal changes your team is navigating but, as we commence these renewal negotiations in the market, we don’t have the luxury of waiting until later in the year to dig in.”
Stockman said the last sentence of the email struck him and his team as “threatening” to take its content to another service. The next day, Stockman said he reminded Wagner about the two-year non-compete provision.
After more discussion, Wagner sent an email to Stockman allegedly going back to the fall proposal that WBD would continue to operate Discovery+ in Canada and Bell would have co-exclusive rights to stream Discovery-related content on Crave.
In late April, Bell said it sent another proposal factoring in the parameters provided by WBD. Stockman claims to have later heard that a WBD counterproposal was in the works “within the next few weeks” at one of the quarterly JV board meetings in May.
Then it waited.
And waited.
And, allegedly, nothing. Despite being assured a counterproposal was in the works, Stockman claims Bell never heard back about a prospective deal.
Instead, on June 3, at around 10:15 am, Stockman allegedly returned a call from Mickie Steinmann, senior vice president and managing director of WBD’s Canadian operations, who told Stockman that because their proposals were “too far apart,” WBD would be moving forward on a licensing deal with Rogers.
Then the threats of legal action began.
And so, here we are.
Bell is asking the Ontario Superior Court for a permanent injunction against the Rogers deal for the two-year period. If granted, the injunction is only expected to impact some programs, including Discovery Channel, Discovery Velocity, Discovery Science, and Animal Planet. Others spared include those previously held by Corus, which has not brought legal proceedings against Rogers.
But, unlike its own situation, Bell alleges Corus’s “trailing” rights to air certain programs after the expiry of its deal with WBD are being respected because of a stipulation in the media company’s agreement that said the Rogers deal excludes “any content licensed to a third party that is encumbered.”
