NEW YORK (Reuters) - Cablevision Systems Corp founder Charles Dolan testified on Monday that it was "quite a reversal" when Dish Network Corp abruptly ended their contract for high-definition programming, a dispute at the center of a long-running legal feud between the two pay TV providers.
Dolan, Cablevision's billionaire chairman, was the first witness in the trial in New York State Supreme Court in Manhattan. Voom HD, a former Cablevision unit, sued Dish in 2008, saying Dish violated a 15-year deal to carry HD programming and should pay $2.4 billion in damages.
Dish has countered that Cablevision did not invest the $100 million per year in the service it had promised.
Voom HD is now a part of AMC Networks, which Cablevision spun out last year. Dish blocked AMC, the company behind critically acclaimed shows such as "Mad Men" and "Breaking Bad," as well as the IFC, WE and Sundance channels from its 14 million customers in July. Media analysts say the trial's outcome could decide whether Dish ever carries the channels again.
Dish Chairman Charlie Ergen is expected to testify later in the trial, which is likely to run about a month. Dolan's son, James, who is Cablevision's chief executive and the owner of the New York Knicks basketball team, had also been expected to testify, but a source close to the case who declined to be identified said on Monday he likely will not take the stand.
Dolan, who turns 86 this month and rarely speaks in public, testified that he was not aware of Dish being anything less than satisfied with Cablevision's Voom HD programming package.
He said he could recall only one criticism that Ergen had with the programming: he did not like a channel called "Rave" that played rock concerts. Dolan said it was known that Ergen dislikes rock music so this did not surprise anyone at Cablevision.
In all of his meetings with Ergen, Dolan said the Dish executive was always upbeat and optimistic the HD channels would be successful and Dish even took a 20 percent stake in the venture.
"We had repeated meetings ... Definitely, (Ergen) was interested ... He appreciated the programming," Dolan said.
Dolan also testified that it had been his idea for Cablevision to invest $100 million per year, or half a billion dollars over five years, in Voom HD.
A key question for the jury will be whether Cablevision spent $100 million a year on the service.
Dish has said that the $100 million clause in the contract pertained to money spent on TV programming only, and because Cablevision only spent $60 million in this area, the No. 2 satellite provider was allowed to terminate the agreement.
Cablevision said that it spent more than $100 million per year on the service, including marketing and overhead costs, as it promised.
When asked what the Voom budget had been earmarked for, Dolan said it was widely known that the money would be used on the entire Voom HD business, which included overhead, marketing and salaries.
Dolan said Dish broke its 15-year contract with Voom HD to pay it $3.25 per subscriber for the channels in 2008, around the same time that other popular networks such as ESPN began offering HD feeds for free.
This made Cablevision "cynical" about Dish's motives in ending the contract, Dolan said.
"Charlie was realizing he could sell (HD channels) without paying us," Dolan said, referring to Ergen.
(Reporting By Liana B. Baker; Editing by Martha Graybow and Tim Dobbyn)
(This story corrects 12th paragraph to say Cablevision spent $60 million and not Dish)