Comcast Settles Lawsuit Over Starz Encore

Comcast Corp. settled a lawsuit Tuesday with Liberty Media Corp., assuring continued distribution of Starz Encore movie programming by the nation’s largest U.S. cable operator.

The dispute centered on the fees that Comcast paid to carry Starz. Comcast had sued Starz Encore a day after purchasing AT&T;’s cable systems last November, alleging that the terms were exorbitant. The new agreement slashes the fees that Comcast will pay by about $200 million a year, Jessica Reif Cohen, an analyst at Merrill Lynch & Co., wrote in a note to clients.

The dispute with Comcast already has reduced profit at Starz Encore, the second-largest business that Liberty Media controls after QVC, the home shopping channel.

The suit illustrates Comcast Chief Executive Brian Roberts’ willingness to use his company’s 30% share of the U.S. cable market to negotiate lower programming fees from all the company’s suppliers. The Philadelphia-based cable operator had stopped promoting Starz during the dispute and withheld fees.

“This deal is essentially a big win for Comcast,” Reif Cohen wrote. She rates Liberty Media and Comcast shares “buy.”

The new contract could be more lucrative for Starz Encore because it allows the cable-programming company to offer new services, including video on demand and a channel for high-definition TV. Starz Encore also will begin a new Starz Kids network, offering children’s movies, on Comcast’s systems.

Liberty shares fell 12 cents to $10.38 in New York Stock Exchange trading. Comcast rose $1.04 to $31.60 on the Nasdaq Stock Market.

AT&T; Broadband had inherited an agreement with Starz Encore as part of its purchase of Tele-Communications Inc., the cable-system operator controlled by John Malone. As part of the TCI sale, Malone negotiated what Comcast contended was a sweetheart deal for Starz.

Comcast spokesman Tim Fitzpatrick declined to comment; Liberty Media spokesman Michael Erickson didn’t return a phone call.