USA Networks Inc. is ramping up for a legal battle with the World Wrestling Federation Entertainment Inc. over the rights to wrestling matches that provide the highest ratings on its USA cable channel.
USA Networks, the media company controlled by Barry Diller, said Wednesday that it had matched an offer made by CBS Corp. for cable-TV rights to WWF programming and had filed a lawsuit against WWF, CBS and its soon-to-be-parent company Viacom Inc. to ensure that the popular shows stay on the top-rated cable network at least through 2005.
One source close to Vince McMahon, chairman of WWF, said the existing contract with USA Networks is vague and open to interpretation. Sources say MacMahon favors Viacom-CBS because, unlike Diller, who he feels has treated him like a used-car salesman, Chief Executive Mel Karmazin has pulled out all the stops to win the bid.
While USA has been downplaying the importance of WWF to the network in recent months, hoping to brace Wall Street for a possible loss of the programming, analysts say the company's preemptive lawsuit demonstrates its desperation to keep wrestling.
Analysts say wrestling is responsible for USA's top ranking, which in turn enables the company to charge high advertising rates. USA's ratings lead is also important in forcing cable operators to expand the carriage of the company's cable services, including the Sci-Fi Channel.
USA has aired WWF matches, which in any given week account for three of cable's top five programs, for 17 years.
Sources close to WWF said the company favors a wide-ranging deal submitted last week by Viacom-CBS, which are merging in a transaction that is expected to be completed this month. The Viacom-CBS package goes well beyond cable to include a $30-million to $50-million equity investment in the company and carriage on broadcast, billboards and radio of both wrestling matches and WWF's new football league, the XFL.
Lacking the broadcast, radio and billboard assets to match a broader Viacom-CBS bid, industry executives said USA's strategy is to look to the courts for an interpretation of its contract with WWF, under which USA Networks has the ability to match rival bids.
The WWF last month opened up the bidding because USA's rights expire in September.
In its statement Wednesday, USA said it was obliged only to match the cable portion of Viacom-CBS's bid. Viacom-CBS plan to put the wrestling matches now shown on USA on their TNN cable channel, which emphasized country music and lifestyles until it was refocused on young men in the last year.
A USA spokeswoman said the company had filed for injunctive relief as a precautionary measure should WWF, Viacom and CBS challenge USA's interpretation of the contract. She said the company wants the court to affirm its rights to the wrestling programming before it presents its fall schedule to advertisers April 27 in New York.
In the lawsuit, filed Wednesday in Delaware Chancery Court in Wilmington, USA Networks argues that WWF tried to force it to offer more than was required under the agreement. Viacom-CBS proposes putting XFL games on UPN, the television network that already airs WWF wrestling programming. WWF would also get the chance to sponsor events at Viacom's theme parks, a commitment for a one-hour television series involving WWF and a fund to develop movie scripts based on WWF characters, the suit said.
USA was prepared to give WWF access to its merchandising know-how. USA owns the largest ticketing company, Ticketmaster, the second-largest home shopping channel and the leading local CitySearch Internet portal.
Sources said USA would be hard-pressed to replace wrestling with programming that is as popular. Despite promises two years ago that new programming chief Stephen Chao would reinvest and reinvigorate USA, the cable channel has failed to score much success with its original programming.
WWF, Viacom and CBS declined to comment on the lawsuit or the negotiations.