Financial Dispute Disrupts RTN Diginet

As a result of a financial feud with its former corporate parent, Retro Television Network went dark for a few hours early Sunday morning as it made a sooner-than-expected flash cut to a new master control and uplink center in Chattanooga, Tenn.

According to RTN principal owner and CEO Henry Luken, the disruption started at 5 a.m. on Sunday morning in the Eastern time zone when Equity Media Holdings, which had been distributing the service to the diginet's 80-some broadcast affiliates, began pulling the RTN programming froom its satellite feeds.

That move forced RTN to rush its own operations center in Chattanooga into service, he said. By 9 a.m., it was able to restore service to the stations with national feeds.

However, it continues to work to restore customized feeds with local spots to about half the affiliates that had contracted for that service. That may take "a few days," Luken conceded Sunday night.

"I literally had 48 hours from scratch to bring in some Ku-band uplink equipment and light some stuff up," he said. "It's sort of a miracle I got it on the air at all."

The disruption of service stems from a running dispute over a services contract between Equity and RTN.

Equity, the publicly traded Little Rock, Ark.-based station group that put RTN on the air, is currently struggling under the protection of Chapter 11 bankruptcy.

Luken, a one-time Equity executive and still its largest single shareholder, purchased RTN from Equity last June for $25 million.

As part of the deal, Equity agreed to provide certain services for the network, including billing and collection, trafficking, master control and distribution from its operations center in Little Rock.

The service deal expired on Dec. 24. The parties agreed to extend it to Saturday, Jan. 3. But unable to reach an agreement beyond that, Luken said, Equity notified RTN that it would be ending its services on Sunday morning.

On Sunday afternoon, Equity issued a press release that its services contract had expired. "EMHC [Equity] attempted to coordinate a seamless transition, but despite repeated attempts to communicate with ... [RTN] representatives, it received no response."

Representatives of Equity could not be reached prior to this posting.

According Luken, the original deal called for Equity to collect all network revenue and to use it to pay most of the operational costs. It was Luken's obligation to make up the difference between the revenue and costs.

Under those terms, Luken said, he paid Equity approximately $150,000 for two months and a lesser amount for a third month.

But he then stopped making payments after he learned that Equity had failed to make payments for RTN programming as he believed it was obliged to do with some of the proceeds from the network sale and that Equity had fallen behind on other bills to outside suppliers.

"They think that I have somehow jilted them," Luken said. "The raw, simple and clean math of it is, they owe me probably somewhere around $2 million because ... they didn't pay about $2 million of content that I am now having to absorb.

"I'm 99.9999 percent sure that any court in the world would tell them that they are absolutely crazy."

Luken said that Equity made sure that RTN's takeover of its distribution would not be easy.

On Friday, he said, "Equity sent us the playlists with commercial insertions in the form of a 16,000-page PDF. For us to effectively and smoothly make the transition, we would have somehow had to enter 16,000 pages of documents into playlist control in less than two days," Luken said. "They didn't want us to transition."

What Equity wanted was for Luken to resume payments to Equity for its services, he said.

Luken said Equity also wanted him to "recontribute" the network back to Equity and take a note for the value of the network -- that is, join Equity's queue of creditors. "We simply said, no."

Equity also refused to transfer the URL for RTN's Web site to RTN. What was once www.rtnville.com is now www.myretrotv.com.

Luken said he believes that RTN has survived the transition without any significant damage.

In its press release, Equity said that it was dropping RTN from its stations.

But Neal Ardman, a consultant who joined Luken and RTN as a consultant after he was let go by Equity on Dec. 17, said that Equity had only four significant affiliates -- in Little Rock; Buffalo, N.Y.; Panama City, Fla.; and Spokane, Wash.

Combined, he said, they account for less than 1 percent of the nation's TV households, a small fraction of the network's total reach, which now hovers around 40 percent.

In any event, the lost affiliates will be replaced quickly by new affiliates, he said.

Other than the Equity stations, RTN has not lost any affiliates so far.