Dish Network CEO on Transitions

Dish Network CEO Charlie Ergen has been through big transitions in his days in the video entertainment business. Many will not recall it, but there was a time when satellite programming delivered to cable TV headends was not encrypted. In other words, any consumer who was willing to spend the money on a satellite system could watch all cable TV programming for free. But in 1986 HBO encrypted its feeds, and all the other satellite-delivered channels followed shortly thereafter.

The transition was that sales of C-band "television receive only" (TVRO) dishes peaked at about 735,000 in 1985, after growing parabolically in the few years before 1985.

Shipments dropped to 235,000 as more than 50 percent of all satellite retailers close their businesses. See http://www.mediabiz.com/news/dth_history/#1983

Ergen started out in the TVRO business in 1980. In 1986 Ergen applied for a direct broadcast satellite license. The point is that the original C-band business erupted somewhat suddenly, then declined just about as suddenly, after satellite feeds were encrypted. The shift of the consumer satellite video business to both Ku-band technology and the DBS business model likewise was a transition from the original C-band business.

Given the maturity of the existing video entertainment business, Ergen, like every other executive at every other company in the space, has been thinking about the implications of the coming shift to online delivery.

"I think I know where this thing is going now," he says. "If you were in the phone business and wireless came along and you kept on putting in a twisted pair of lines, that was still a good business for another 10 years, 15 years, but at some point that wasn't a very good business."

"So I'd rather be on the leading edge of that than the back end of it," he said.

"The hope is that you don't take too much money out of the ecosystem while you're figuring it out," he said. What he means is that the new business might cannibalize the existing business, and the trick will be to finesse the transition without undue cannibalization.

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