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:
Netflix soars, investors cheer…then Web service crashes.
It’s been a heady few months for Netflix, the DVD by-mail company fast becoming a online video streaming service. Yesterday, its third quarter numbers again beat Wall Street expectations as it revealed it is now the third largest video subscription service behind Comcast and DirecTV with nearly 17 million subscribers. Wall Street analysts at UBS and Oppenheimer, already in love with the company, upgraded it on Thursday morning helping to push shares to a new record high of $174.40 before closing at $172.69. To think you could have bought the stock for $47.56 exactly one year ago.
Analysts were m0st excited about the potential for Netflix’s video streaming-only service, which will do away with the heavy expense of delivering DVDs to subscribers homes across the country. In the words of Netflix Chief Executive Reed Hastings (here pictured):
“Three years ago, we were a DVD-by-mail company that offered some streaming.” “We are now a streaming company, which also offers DVD-by-mail.”
And then came the crash. Netflix’s streaming service crumbled on Thursday, as reported earlier by CNET. The company told CNET it is aware of the problem and is working on it. Akamai, Netflix’s primary content delivery network for streaming videos, said there were no issues with its service (er, thanks guys!).
The service came up shortly after, but the damage had been done. Hopefully, this was a one-off; but, as Multichannel News reported yesterday, Netflix accounts for 20 percent of peak U.S. Internet bandwidth traffic between 8pm to 10pm, according to a study by Sandvine.
Charlie Ergen: Satellite cowboy, TV viewer, pitchman
Charlie Ergen is best known in media business circles as the straight talking homely founder of satellite TV provider Dish Network Corp. He’s often been disarmingly honest on quarterly conference calls with Wall Street analysts by admitting that he had personally taken his eye off the ball when the company was losing customers a few years ago or putting his annual family vacation ahead of being present on the quarterly call.
Well Dish Network’s marketing team is hoping that Ergen’s southern gentleman charm can win over new customers or at least keep old ones in the pay-TV wars versus DirecTV Group and the various US cable operators.
Ergen appears in a new in-house produced campaign below talking about his pride in the company he founded, his “embarrassing” picture from his early days, and its recent success in customer service etc.
Dish Chief Marketing Officer Ira Bahr said that his boss is a “plain-speaking, easy-to-understand American TV viewer” just like the kinds of people the company is trying to win over in a business sector where there is so much “yelling and price competition” between the various players (Dish has been as guilty as anyone in that respect as you can see here and here).
But outside of crisis management does recruiting the boss as your top pitchman really work for a major national brand campaign? The closest most recent example would be mobile phone company Sprint CEO Dan Hesse, who first hit our screens in a black & white stylish campaignsoon after he joined in 2008. Sprint’s fortunes haven’t exactly improved since the end of 2007 the last quarter before he joined the company. Sprint has lost more than 5 million customers, though the rate of those losses appear to have narrowed in recent quarters. Bahr argues that a professional CEO as pitchman doesn’t have quite the same marketing resonance as that of a founder CEO like Ergen and Dish is currently on the up having already added 700,000 customers in the last year or so.
But what does branding professional Allen Adamson think of Dish’s ad spot?
Adamson, who is managing director of branding agency Landor Associates and author of BrandDigital, said: “It’s a fairly tricky thing to do. Personalities of CEOs don’t necessarily always match up with the brand and ultimately may not be persuasive. It really is about how credible and powerful a communicator the CEO is. (Ergen’s) techy personal matches his office with model rocket by the window and lends some credibility but I still feel that he is not the best way to tell the Dish story”
This is the Dish of old. Personable attentive customer service. I have been a loyal customer of dish since it’s inception in 1996 and have experienced the change in customer service to the point of disconnection from it’s consumer. They no longer accept telephone calls at the corporate level and in addition only receive written communication by snail mail and PO box. My advice if you want good customer service look elsewhere.
Karmazin, Ergen and Malone: paper tigers?
When media moguls duke it out, what’s their battleground? Newspapers, evidently.
For the past week, EchoStar boss Charlie Ergen and Sirius XM radio’s CEO Mel Karmazin have been doing battle on the pages of two venerable dailies, The Wall Street Journal and The New York Times. The Journal had a head start on the story, reporting how Ergen had started buying up Sirius debt in an attempt to force the satellite radio company into a deal. Then, it revealed how Ergen had actually made an offer to buy Sirius, which Karmazin rejected.
While the rest of the media was digesting all this, out came the Times with a story that said Sirius was preparing for a Chapter 11 bankruptcy filing, which could come within days. It had even hired bankruptcy experts, the Times wrote. The Journal quickly swatted that idea down, saying:
“The hiring of bankruptcy and restructuring advisers, while not surprising given the company’s financial predicament, doesn’t mean a filing is imminent.”
It refined that idea in a story Wednesday night, taking a direct swipe at the Times’ reporting:
“This week, Sirius representatives responded to Mr. Ergen’s move by spreading word that the company was preparing to file for bankruptcy and had hired bankruptcy and restructuring advisers. Company officials also privately told investors that Sirius has entered a “zone of insolvency” and that a bankruptcy filing would be preferable to cutting a deal with Mr. Ergen, according to people who participated in the discussions.”
The New York Post has since gotten into the game, and all three papers reported on Wednesday the appearance of a “white knight” in the form of Liberty Media’s John Malone, who controls DirecTV.
Looks like Yahoo’s not buying Tumblr
Gawker/Valleywag created a bit of stir on the blogosphere Monday with its report that Yahoo was in talks to buy blogging startup Tumblr for “low to mid-eight figures,” or as much as $50 million.
From the post:
We hear the talks are serious, led by Tapan Bhat, a fast-rising executive in charge of Yahoo’s homepage and other key properties — but as with any acquisition talks, they could fall apart.
We figured Yahoo’s new CEO Carol Bartz was too busy figuring out where Yahoo should seek growth and how to stem the leaky ship to pursue an acquisition. Sure enough, Silicon Alley Insider knocked down the Valleywag story by getting Tumblr founder David Karp on the record:
We called David and he said the rumor is categorically false. “We’re just hearing about this now,” he said.
Speaking of acquisitions, it seems like no one’s doing too well with the stuff they’ve bought. Just a couple of days ago, News Corp wrote down the value of its $5.6 billion 2007 acquisition of Dow Jones. And yesterday, Cablevision said it would write down its acquisition of Newsday by $375 million to $450 million. As you may remember, Cablevision bought the Long Island paper just last year for $650 million.
- The recession has taken a heavy toll on sales of celebrity gossip magazines, but magazine circulation in general has held up well, according to the Audit Bureau of Circulations. (NYTimes)
- Google has developed a free Web service called PowerMeter for consumers to track energy use in their house or business. (NYTimes)
- DirecTV Group added more subscribers than expected during the fourth quarter but rising marketing costs and other expenses dragged down its quarterly profit. (Reuters)
- Omnicom Group shows more resilience to budget cutbacks than Wall Street had expected, but profit still falls 14 percent. (Reuters)
DirecTV bats for cricket in the U.S.
Sports fans in the US will now have the chance to cheer fours and sixes as much as home runs.
Satellite TV service provider DirecTV Group plans to step off the baseball diamond and onto the pitch by bagging broadcast rights for big-ticket cricket tournaments in 2009.
With an Asian Indian population pushing 3 million in the US, DirecTV is assured of a loyal fan following. Indians are crazy about the game, with the country boasting the largest global cricket audience. Cricketers are feted like pop stars and tote multi-million-dollar sponsorship deals.
An unclear future for DISH?
Wall Street sell-side analysts seemed to be unsurprised by AT&T’s decision to pick DirecTV as its video marketing partner for its version of the ‘triple play’ package, in regions where it hasn’t built out its U-verse digital service.
The final decision had seemed obvious to analysts after DISH said earlier this month that AT&T would extend its five-year relationship by just one month to Jan 31.
But what does it mean for the independent DISH and its maverick founder/CEO Charlie Ergen (pictured), with the No. 2 U.S. satellite TV provider already struggling with customer losses in a tough economy?
Here’s what a few analysts say:
Craig Moffett, Sanford Bernstein.
The announcement is a clear negative for Dish Network, and a major win for DirecTV. As a result, we now expect Dish Network to post a sizable (400,000) subscriber loss for full year 2009. We had previously expected approximately flat net growth. For DirecTV, we now expect a gain of 800Kwhere previously we had expected approximately half that.
Ingrid Chung, Goldman Sachs:
TiVo CEO: Subscribers will come
A couple of years ago, if you had suggested TiVo and DirecTV would ever kiss and make up — after DirecTV dumped TiVo in favor of DVRs by NDS (then a cousin in the News Corp Family) — you might have said it was as likely as “90210″ coming back to TV.
Well one day after the new “90210” premiered on the WB network, TiVo and DirecTV said they are working on a new HD TV set-top box. The agreement puts TiVo in a position to turn a bigger portion of DirecTV’s 16+ million customers into TiVo subscribers, in a deal that TiVo says will reap more in fees than previous agreements.
Reuters spoke to TiVo CEO Tom Rogers about the deal.
Reuters: This is kind of like getting back together with your first love. Rogers: I’ve been saying for a long time that with DirecTV’s ownership by Liberty Media, it created a new atmosphere and a new environment. I think the management of DirecTV has always been supportive of TiVo and believes that we can put together a very exciting offering.
Reuters: DirecTV is still going to offer generic DVRs to its subs? Rogers: We are comfortable with that. We recognize that generic DVRs will continue to exist. The biggest contributors to confusion between what is Tivo and what is “DVR” has been mass distributors themselves and obviously the more deals we do the more people have interest to make sure that there is a DVR offering and then something very different that is TiVo.
Reuters: DirecTV TiVo users don’t pay fees to TiVo directly. Is this deal lucrative for you? Rogers: It was very a successful arrangement for us. There is a lot of financial upside.
Reuters: You are still in court with EchoStar, the other satellite provider. Do you see a time when you will make a similar deal with them? Rogers: We kind of have a three-pronged strategy: Our go it alone route, our join ‘em route, which is what you could say this is, and our fight ‘em route, which is what EchoStar is. We are getting to the end of the enforcement stage in our fight with EchoStar. Tomorrow we are back in front of the judge for a hearing (related to an injunction and damages).
DISH’s Ergen won’t give in to TiVo: ‘I’m just stubborn’
You can think what you like about the management of DISH Network Corp, the second largest U.S. satellite TV operator, but they’re nothing if not refreshingly frank about the economy, the state of the market and their competitors’ tactics.
Of course, a lot of that has to do with the disarming candor of founder and Chief Executive Charlie Ergen, whose conference calls tend to avoid the sort of obfuscation and Orwellian double-speak the media and investors have to come expect from C-level executives in corporate America.
Ergen had to be especially blunt today on a day his company announced a loss 0f 25,000 subscribers, which according to Bernstein Research’s Craig Moffett, was its first ever loss of subscribers.
On competition:
(There are) really competitive offerings in the marketplace, as the biggest being probably the phone companies and FiOS and U-verse, where there are a lot of introductory offers out there that I think they had about close to 350,000 net additions in the second quarter so they’re taking those some from us and some customers from others. Obviously in the Hi-Definition front we haven’t been as competitive as we would have liked in the second quarter, particularly versus DirecTV.
On AT&T ending a joint marketing partnership and calling for the repayment of a $500 million investment:
They contractually were allowed to do that. Our loan from them was at 3 percent interest, probably their (AT&T) CFO looked at that and made a very logical decision to say ‘we can probably do better with that money’. Their operations people probably said that we’re probably in a better position to have flexibility going forward in video, if we want to stay with a satellite partner, it would be better to talk to multiple partners than one and see what the best deal out there is. So we have to be ready as a company.
DISH Network was ordered recently to pay $460,000,000. to TiVo. Ouch! I like DISH Network as a company and am a subscriber myself; but I will admit that lately DISH has been taking a lot of incoming hits. I don’t have any idea what DISH’s financial situation is; but too many more rulings like the TiVo one could really hurt and no doubt they will lose even more customers now over the DVR flap.
Who’s winning pay-TV war this quarter?
So who’s winning the pay-TV so far this year? With days to go until two of the biggest cable operators (Time Warner Cable on Wednesday and Comcast on Thursday) report first quarter financial results, Reuters canvassed eight Wall Street analysts for their estimates of subscriber net additions during the period.
At first glance it doesn’t look like it will be a good quarter with these analysts forecasting Comcast, Time Warner Cable and Cablevision to lose around 100,000 basic TV subscribers collectively, while satellite TV plays DIRECTV Group and DISH Network will add around 320,000.
Even more worrisome for cable companies? AT&T and Verizon added around 410,000 new TV subscribers between them during the quarter.
Yet at least one analyst cautions investors not to read too much into cable’s basic video subscriber losses as this metric is not as important to growth as the addition of other revenue generating units in particular Internet access and phone.
“It would be missing the point to focus on basic video subscriber adds,” says Chris Marangi, an analyst at Gabelli & Co. which holds shares in Comcast, Time Warner Cable, Cablevision as well as the two satellite TV companies.
“Voice services and high speed data subscribers is what drives revenue growth,” says Marangi.
(Photo: Reuters/Glenn Britt (l), Brian Roberts (r))
