Z Channel Sues HBO, 4 Major Studios

Owners of Z Channel, a small but popular pay television service in Los Angeles, on Monday filed suit in federal court accusing Time Inc.’s Home Box Office and four major Hollywood studios of unlawful restraint of trade.

In its 25-page complaint, Z Channel contended that HBO, the nation’s largest pay television company, “has secured or coerced” the cooperation of MGM/UA Telecommunications, Paramount Pictures, 20th Century Fox Film Corp. and Warner Bros. in “restraining and impairing” Z Channel’s ability to compete with HBO. The suit seeks unspecified damages and a ruling that the defendants will violate federal antitrust law if they refuse to supply programming to Z Channel.

At issue is Z Channel’s plan to begin selling advertising spots during its airing of sporting events, and its plan to switch to a satellite delivery of its service. In the past, Z Channel has distributed its programming by terrestrial microwave to cable company affiliates.

HBO allegedly notified or reminded each of the four studios that their deals with Z Channel would preclude such changes. Yet without satellite transmission and some acceptance of advertising to support its costly sporting events, Z Channel contends that it would “likely be eliminated as a competitor.”

An executive at one of the four studios confirmed that his company had received a letter from Home Box Office reminding it of contract provisions that would prohibit his studio from supplying movies under the conditions now proposed by Z Channel.

The executive did not say how his company would respond, but he said of HBO: “It may be legal, but it’s certainly offensive. It’s this big guy wanting to crush little guys.”

Z Channel is owned by Rock Associates and American Spectacor, a joint venture between American Cablesystems and Spectacor. The new owners had announced plans to try to turn around the money-losing venture by adding sporting events such as 35 Dodger and 35 Angel home games, with the new programming to begin April 1.

Spokesmen at Paramount, Fox and MGM/UA declined to comment, and Janice Bender, HBO’s West Coast director of press information, said no HBO executives could be located for comment late Monday.

But at Warner Bros., “the suit was unexpected,” said Robert G. Friedman, senior vice president of worldwide advertising and publicity. “We’ve indicated that localized satellite transmission to cable systems is not a problem for us and we have indicated that we are currently researching whether the advertising in the baseball games does create a problem,” Friedman said.