What’s Charlie Ergen’s strategy this week?
Satellite TV billionaire Charlie Ergen isn’t a regular on Dish Network’s analyst conference calls these days especially
since he stepped down in May as chief executive (which he still chairs). But when he makes an appearance, nearly as rare these days as one of those biennial dividends it pays, it’s worth a listen.
After losing more subscribers than expected in the third quarter Dish executives pointed to larger rival DirecTV’s hugely successful NFL football Sunday Ticket giveaway as the primary source of competition.
Ergen’s surprise appearance on the call allowed analysts to pivot away from the dreary operational numbers and discuss his vision of the pay-TV space. In May he had described Dish’s hodge podge of investments in wireless broadband and content as the “Seinfeld Strategy”. In other words, it’ll all make sense in the end. We hope for investors’ sake that’s right.
Ergen’s view on competition:
– I think from a macro point of view, clearly DirecTV’s results showed there’s still a big business out there for satellite television on a standalone basis and the rest of the industry absent the phone companies really was negative, so I think there’s still business out there. Satellite is still the most efficient way to deliver video. We’re just not getting our fair share of it yet, but having said that, the other macro trend is we’re continuing to use more consumers are consuming more bits and bites of zeros and wants, could be data, video, it could be voice, so I think that strategically, we believe we have to be in something other than a standalone video business as a Company and we’re in the transition of being able to do that.
That’s going to take some time and it’s unclear whether that’s going to be a smart business decision or not but we think that the way that the zeros and ones come together are going to be beyond just video and you’re going to need to be beyond fixed video to the home, so that’s a path that we’re on strategically and we think that’s going to pay dividends for us long term.
Ergen’s views on rising programming costs:
– I think it’s going to be interesting because the price of sports programming has gotten so kind of out of line compared, so sports programming may be 20% of the viewing on a day-to-day basis but it may be 50% of the cost that the consumer pays and so not everybody is probably …most people on this call are sports enthusiasts but not everybody is and it’s going to be interesting to see what happens because you really got four providers in every market now, the phone company, cable company and two satellite companies and everybody sells the same thing, everybody’s packages are generally the same and contractually, the sports providers require that you put their programming in the vast majority of their contracts, so as contracts come up for renewal, I would say there could be a day when one of the big providers just doesn’t have a sports offering so that they can differentiate their programming in a major way so in theory their costs could be cut by half to the consumer but the consumer really likes sports, those 20 or 30 percent of the people who are sports enthusiasts would not be your customer but you’d be more attracted to the other 50 or 60 or 70 percent of the customers that are out there and if the economy continues to struggle along that’s probably a valid long term strategy.
Ergen’s wireless vision:
-Well, I think that if you look at mobile video, of course obviously we wouldn’t have to, we could count on destiny from a mobile perspective but if you’re looking at it from a fixed data perspective I certainly think the wired infrastructure is probably for the vast majority of homes both on cable and phone companies, the more economical way to do it, but having said that, obviously, you look at the way people are going to consume video and when you look at tablets and phones and this is starting to be pretty compelling from a video perspective. I think that to be able to offer customers video in a fixed and mobile basis is the kind of thing from a competitive point of view that Joe (Clayton, CEO) and his team can market at a whole new level because it’s such a differentiating potential item and the third thing is going to be and I think the cable guys are working this quite a bit is that the Wi-Fi hotspots continues to be a place that everybody that are getting pretty good in a place where people go now to consume lots of video and data and that’s additional places where we can play without owning the spectrum as well, having said that owning spectrum can help us in those areas as well, so I like spectrum.
The government is not printing anymore of it. It’s the macro trend of data consumption is growing and it continues to grow at an exponential rate and there’s a huge paradigm shift in the technology to LTE from 3G and really even 4G is not really an attempt so it’s almost like going from MPEG1 to MPEG2 to MPEG3 and so it’s a good time to enter the marketplace because you can enter with a new technology that’s more efficient than technologies out there today that people have already invested in and haven’t fully depreciated yet so there’s a lot of interesting dynamics that are going on and like anything else in technology, timing is critical and so far, I feel pretty good about our timing although it’s not going to go as fast as perhaps people on this call want it to go, it’s not going to make a difference in the next quarter or the next quarter after that but it’s going to make a difference in years to come.