As the dispute between Sony Group (SONY.US) and Paramount Universal (PARA.US)'s CBS (CBS) continues to escalate, Sony notified CBS on February 3 that it will take over the global distribution rights of two popular TV game shows, "Wheel of Fortune" and "Jeopardy!". Sony said in a letter to CBS on Monday that it has assumed the broadcasting tasks of the program originally scheduled to be broadcast the week of February 10 and has delivered the relevant programs to CBS.
In response, CBS plans to apply for a temporary restraining order to block Sony's move. CBS emphasized in a statement: "Under the distribution agreement, Sony has no right to terminate the agreement, and CBS remains the legal distributor of the series. All business should continue as usual." In addition, CBS also stated that it will immediately seek relief from the court to maintain the existing arrangement.
It is understood that the dispute stems from Sony's dissatisfaction with CBS's performance of its long-term distribution contract. Sony accused CBS of making more than $1 billion in distribution deals over the past 35 years but failing to grow advertising and licensing revenue.
Sony also pointed out that CBS made more than $3.6 million in profits from licensing agreements with Australia and New Zealand that lasted more than two years and refused to give up these "ill-gotten gains." Additionally, Sony blamed CBS's "dismal performance" in part on layoffs at Paramount Worldwide, saying the company had laid off 2,800 employees over the past year.
CBS pushed back, saying its contract clearly stipulates that it owns distribution rights to the series in perpetuity, and strongly refuted Sony's accusations, saying it had done its best to distribute the shows and complied with its obligations under the agreement. In addition, CBS also pointed out that any dispute by Sony regarding the withdrawal of distribution rights will be subject to the ongoing judicial proceedings.
According to the Los Angeles Superior Court indictment, CBS has for many years expected its licensing revenue to achieve 2% year-on-year growth, a forecast that triggered "doubts and concerns" from Sony. Sony pointed out that in the first year of participating in the negotiations for the ABC TV station, licensing fees increased by 17%.
The lawsuit has been previously reported in the media. The case is called "Sony Pictures Inc. v. CBS Studios Inc." and was heard in the California Superior Court in Los Angeles County.
Overall, the dispute comes against the backdrop of a transformation in the television industry, with viewers shifting from traditional broadcast and cable channels to streaming services such as Netflix (NFLX). The shift has squeezed profits for traditional media companies, prompting them to seek to cut costs. In addition, Sony proposed an agreement to acquire CBS for a nine-digit price last year, but the dispute between the two parties is still continuing.
A Sony spokesman said that although both parties have tried various ways to resolve the issue, nothing has worked. Sony expressed concerns about CBS' contract performance issues, layoff plans, outsourced ad sales and failure to reach an agreement with Nielsen. The amount of compensation Sony is seeking has not yet been determined.