SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: MARCH 20, 2003
Date of Earliest Event Reported: MARCH 20, 2003
LIBERTY MEDIA CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-20421 84-1288730
(Commission File Number) (I.R.S. Employer Identification No.)
12300 LIBERTY BLVD.
ENGLEWOOD, COLORADO 80112
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (720) 875-5400
ITEM 9. REGULATION FD DISCLOSURE.
This 8-K is being furnished by Liberty Media Corporation pursuant to Item 9
in compliance with Regulation FD in anticipation of disclosures to third parties
of the matters described herein.
Liberty has previously disclosed that its subsidiary, Starz Encore Group
LLC, initiated a lawsuit in July 2001 in a Colorado state court against AT&T
Broadband and its subsidiary, Satellite Services, Inc., for breach of contract
and collection of damages and costs. That lawsuit arose out assertions by AT&T
Broadband (f/k/a Tele-Communications, Inc.) that the excess programming costs
pass through provisions of Satellite Services' affiliation agreement with Starz
Encore Group LLC are unenforceable and that the affiliation agreement, as a
whole, may be "voidable." Under that affiliation agreement, which was entered
into in 1997, AT&T Broadband made fixed monthly payments to Starz Encore in
exchange for unlimited access to all of the existing Encore and STARZ!
programming services for cable systems operated by AT&T Broadband and various
affiliated companies. The payment from AT&T Broadband could be adjusted if AT&T
acquired or disposed of cable systems, or if Starz Encore's programming costs
increased or decreased above or below amounts specified in the agreement. AT&T
Broadband's payments were to be adjusted by a proportion of any such increase or
decrease in programming costs.
On October 29, 2001, the parties to the Colorado action entered into a
tolling agreement pursuant to which they moved the court to stay the lawsuit
until August 31, 2002, to permit the parties an opportunity to resolve the
dispute. In conjunction with that agreement, AT&T Broadband and Liberty Media
entered into various agreements whereby Starz Encore indirectly received payment
for AT&T Broadband's proportionate share of the programming costs pass through
for 2001. The stay and tolling agreement were extended by the court and the
parties until January 31, 2003, at which time the stay and tolling agreement
expired.
On November 18, 2002, AT&T Broadband completed a transaction in which AT&T
Broadband and Comcast Holdings Corporation (f/k/a Comcast Corporation) became
wholly owned subsidiaries of Comcast Corporation (f/k/a AT&T Comcast
Corporation). On the same day, Comcast Corporation and Comcast Holdings
Corporation filed an action for declaratory judgment against Starz Encore in the
U.S. District Court for the Eastern District of Pennsylvania, alleging that
Comcast Holdings' affiliation agreement with Starz Encore permits Comcast
Corporation to terminate the AT&T Broadband affiliation agreement and to replace
that agreement with Comcast Holdings' affiliation agreement with Starz Encore.
Comcast Holdings'affiliation agreement with Starz Encore provides for a per
subscriber fee rather than the fixed monthly payments provided for in the AT&T
Broadband agreement and has no provision for the pass through of excess
programming costs. Starz Encore has filed a motion to dismiss that case on the
grounds that the claims made by the plaintiffs should be made in the Colorado
state court proceeding initiated by Starz Encore.
On January 31, 2003, Starz Encore filed a motion to amend its complaint in
the Colorado action to add Comcast Corporation and Comcast Holdings Corporation
as defendants, claiming, among other things, breach of contract and intentional
interference with contractual relations. It has since filed a motion seeking to
add additional claims to its complaint.
AT&T Broadband has stopped making payments under its affiliation agreement
with Starz Encore. Instead, Comcast Corporation has made payments to Starz
Encore related to distribution of Starz Encore's services on AT&T Broadband's
cable systems based on its claim that the per subscriber fees payable under
Comcast Holdings' affiliation agreement are applicable, which has resulted in
lower aggregate payments to Starz Encore. In addition, both AT&T Broadband and
Comcast have limited their cooperation with Starz Encore on various matters,
including, for example, promotion of Starz Encore's channels.
Starz Encore is vigorously contesting Comcast's claims in the Pennsylvania
federal court proceeding and believes that it will succeed in its defense of
those claims. Starz Encore is also vigorously prosecuting its claims in the
Colorado court proceeding and believes that it will succeed in obtaining a
judgment against the defendants in that proceeding. However, because both
actions are at an early stage, it
is not possible to predict with a high degree of certainty the outcome of either
action, and there can be no assurance that those actions will ultimately be
resolved in favor of Starz Encore. If Starz Encore were to fail in its efforts
to enforce its affiliation agreement with AT&T Broadband, that failure would
have a material adverse effect on Starz Encore's revenue and operating income.
Because of the uncertainty in predicting the outcome of the court actions,
Liberty has determined for financial reporting purposes to exclude from Starz
Encore's revenue the amounts due under the AT&T Broadband affiliation agreement
from and after November 18, 2002. Rather, from that date it is including revenue
amounts due under the Comcast affiliation agreement on account of distribution
of the Starz service on AT&T Broadband's systems. This treatment is in
accordance with SEC Staff Accounting Bulletin 101, which provides that revenue
should not be recognized unless collectibility of amounts owed is reasonably
assured. The reduction in revenue based upon the difference in payments
prescribed in each of the Comcast and AT&T Broadband affiliation agreements was
approximately $9 million for the period from November 18, 2002 through December
31, 2002. Starz Encore had revenue of $945 million and operating income of $297
million for the year ended December 31, 2002.
For the year ending December 31, 2003, Starz Encore estimates that the
difference in revenue as calculated under the AT&T Broadband and Comcast
affiliation agreements, respectively, will be approximately $80 million. The
estimated difference in revenue would have approximately a dollar-for-dollar
impact on Starz Encore's operating income, as Starz Encore would not realize any
significant cost savings associated with the reduction in revenue. The foregoing
reduction in revenue does not reflect the impact of any changes in marketing
efforts or packaging of Starz Encore's services that Comcast may implement. No
assurance can be given that any marketing or packaging changes that Comcast may
implement will not have a material adverse effect on Starz Encore's revenue and
operating income.
There were no excess programming costs in 2002 that Starz Encore had the
right to pass through to AT&T Broadband under its affiliation agreement, and
none are currently expected in 2003. Because the amount of excess programming
costs is subject to a variety of factors, including receipts from theatrical
release of motion pictures covered by Starz Encore's agreements with movie
studios, Liberty is unable to estimate the share of those excess programming
costs that could be passed through to AT&T Broadband, were the AT&T Broadband
affiliation agreement held enforceable, for 2004 and thereafter. However, such
amounts could be significant.
Certain statements in this Form 8-K may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance or achievements of Liberty Media and its subsidiaries or industry
results, to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
risks, uncertainties and other factors include, among others: the risks and
factors described in the publicly filed documents of Liberty Media, including
the most recently filed Form 10-Q of Liberty Media; general economic and
business conditions and industry trends including in the advertising and retail
markets; the continued strength of the industries in which Liberty Media
operates; uncertainties inherent in proposed business strategies and development
plans; rapid technological changes; future financial performance, including
availability, terms and deployment of capital; availability of qualified
personnel; changes in, or the failure or the inability to comply with,
government regulation, including, without limitation, regulations of the Federal
Communications Commission, and adverse outcomes from regulatory proceedings;
changes in the nature of key strategic relationships with partners and joint
ventures; competitor responses to Liberty Media's products and services, and the
overall market acceptance of such products and services, including acceptance of
the pricing of such products and services; and threatened terrorist attacks and
ongoing military action, including the potential for armed conflict in the
Middle East and other parts of the world. These forward-looking statements speak
only as of the date of this Form 8-K. Liberty Media expressly disclaims any
obligation or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in Liberty
Media's expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: March 20, 2003
LIBERTY MEDIA CORPORATION
By: /s/ Christopher W. Shean
----------------------------
Name: Christopher W. Shean
Title: Senior Vice President
and Controller