Friday, March 27, 2015

Sling TV will Cannibalize Dish Network Linear Video, says CEO Charlie Ergen

A recurring phrase used by Dish Network CEO Charlie Ergen, when asked about his plans for monetizing Dish Network’s spectrum holdings, is that “we are not suicidal.” In other words, Dish Network does not intend to deploy or monetize those assets in ways that destroy shareholder value.

“Wireless is an oligopoly,” he noted recently. So that means “we see working with others, not AT&T or Verizon.” In other words, should Dish Network decide to create a retail or wholesale network, it is not likely to build its own facilities, but lease them.

“Optionality” is a concept Ergen has relied on it the past, as well. In other words, get spectrum and then see what can be done to monetize it. “Short term, we had to get the licenses,” Ergen said. “Then we need to get handset compatibility.”

“We will see where it goes from there,” he said. But Ergen also said he will wait to see what happens “with the two big mergers,” referring to Comcast’s bid to acquire Time Warner Cable, and AT&T’s effort to buy DirecTV.

When Ergen says “we don’t know for sure what we’re going to do,” that likely is quite accurate. “Our dream is to compete with AT&T and Verizon, but we’re not suicidal,” Ergen said. “Whatever we do, it is long term value enhancement.”

Ergen also was honest about another thing: “without our spectrum, we would have had to sell.” In other words, like DirecTV, Dish Network would have been in an untenable situation as a stand-alone satellite TV company.

But Ergen has been more willing to cannibalize his legacy revenue streams to remain a leader in the new business he sees emerging, much as Disney has been in the forefront of streaming, when other peers are more hesitant.

That’s a somewhat unusual strategy for any firm that is a leader in its space. And Ergen does believe even Sling TV will cannibalize Dish Network’s linear subscription business. But it is the future. In the past, Ergen has said that if he were starting in the video entertainment business today, he might not use satellite delivery.

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