The announcement provided a slight upward jolt to the satellite company’s stock this morning. Dish says that it will sell $1B in senior notes — details will come later in an SEC filing. But the press release pointedly says that the cash may be used for “wireless and spectrum-related strategic transactions” in addition to the boilerplate “general corporate purposes.” Dish Chairman Charlie Ergen has been amassing spectrum rights to launch his own wireless broadband network. He has said that he’d like to team up with a someone already in the business, and made a bid for Clearwire — although the smart money is betting that the wireless venture will end up with Sprint. If that happens, Ergen has said that “we think we have other options” to build a service.
Here’s something you rarely see in Big Media: Dish Network — one of the industry’s most frugal companies when it comes to executive compensation — cut the outlays for most top execs, with CEO …
The Dish Network chairman says he missed the boat with his strategy for Blockbuster: He told AllThingsD’s “D: Dive Into Media” conference today that he bought the video chain out of bankruptcy because he wanted to use the stores to sell a new wireless broadband service he’s developing. But that became moot when his effort took longer than he envisioned. Meanwhile, “we were too late” to the streaming business. “Under the radar [Netflix] got critical mass and [now] can buy any program that they want to,” Ergen says. “We didn’t have the guts to buy the content and start from scratch.” That doesn’t mean Amazon’s streaming service is doomed. “They both can be successful….Amazon can subsidize it.” But Ergen says he’s a “fan” of Netflix and its business model. The financing of the original series House Of Cards was “brilliant…I feel stupid that we didn’t think of it first.” The man behind the Hopper ad-skipping DVR — being challenged in court by broadcasters who say it violates their copyrights — also got some laughs by noting that Netflix has no commercials. “They’re not getting sued. You can watch 60 Minutes in 40 minutes.”
That long-debated question on Wall Street took on new urgency today after Bernstein Research’s Craig Moffett bet that the companies will make a deal, and that it will be approved by the FCC and antitrust officials. This morning he raised his target stock price for each company by $9 (to $72 for DirecTV and $37 for Dish) “to reflect the increased probability of a merger.” Why now? Dish seems to have leverage over the FCC, which wants to promote competition in broadband and telephony more than it wants to block media mergers. Charlie Ergen’s company has been amassing wireless spectrum that “offers the prospect of either a fixed wireless broadband network to compete with cable, or, alternatively, a new competitor for mobile wireless to compete with Verizon and AT&T,” Moffett says. “Either would be a tremendous regulatory (and political) win” for the government. By year-end regulators likely will help their cause, and Ergen’s, by giving Dish permission to use its spectrum for terrestrial services. But the approval will include a timetable requiring Dish to deploy its services quickly. That gives Ergen the opportunity to tell regulators that he’ll proceed — but only if they enable Dish to combine with DirecTV, Cost savings and other benefits could amount to $3.5B a year, which Moffett says is “a staggering sum.”
Dish Network Chairman Charlie Ergen can change his tune on an issue more elegantly than just about anyone in the media business. Consider how easily he just reversed himself in an analyst call where he explained his company’s agreement to resume carrying AMC Networks’ channels, which he dropped in June. He brought them back as part of the $700M deal to settle AMC’s breach of contract suit against Dish after it ended a 15-year agreement to carry the now defunct VOOM HD networks. Ergen noted that AMC’s hit The Walking Dead is “off the charts.” If the channel has more shows like that “then it will be a fair deal for us.” And he likes the AMC folks. “Absent the litigation we probably wouldn’t have gotten to that point” of dropping the channels. That’s a head-spinning shift from three months ago when he said it was a question of cost, not courts. AMC’s networks were too expensive, he said then, especially since “our customers are not looking at zombies in New York City… They live on farms and ranches.” What’s more, he preferred doing business with Mark Cuban, whose HDNet channels took the slots formerly held by AMC’s services.
Dish Network Chairman Charlie Ergen warned analysts in a conference call today that his company will lose some customers — or have trouble attracting new ones — since it dropped AMC, IFC, WEtv, and Sundance in late June. But he says the decision was a “no-brainer” that will pay off for Dish in the long run. “Our customers are not looking at zombies in New York City”, he said referring to AMC’s hit The Walking Dead. “They live on farms and ranches”. Ergen added that he might have renewed AMC, but bucked at the company’s requirement that Dish also carry the other networks. “There hasn’t been a time when anyone in our family has watched one second of those channels”. He was also dismissive of AMC which has acclaimed series including Mad Men and Breaking Bad. “They’re critically acclaimed but not viewed as much by our audience”, he says. “And our customers can go to iTunes and get Mad Men the same time it’s on. We could pay the entire iTunes bill and it would be cheaper” than carrying the AMC Networks channels. Indeed, Ergen says that by not carrying the AMC channels Dish will be “several dollars cheaper than our competition that’s carrying those channels”.
After years of eschewing the public spotlight, Dish Network Chairman Charlie Ergen showed today at a congressional hearing that he hasn’t lost his keen debating skills. He skewered broadcast stations for acting as “a government-sponsored monopoly” when demanding higher fees from pay TV providers under the federal retransmission consent rules — and withdrawing programming when negotiations break down. “The problem is only getting worse — with more blackouts and more broadcaster abuses,” he told the House Energy and Commerce Subcommittee on Communications and Technology’s hearing today on the Future of Video. ”From where we sit, the broadcasters cling to the status quo instead of meeting consumer demand and embracing new technologies and business models.” Ergen added that while stations demand payments for pay TV carriage of their over-the-air signals, their commitment to localism “has gone down” — for example many stations have begun to share newscasts. “The retransmission consent regime is a prime example of an outdated government policy in need of an overhaul by Congress and the FCC.” One way to fix things, he says, would be to allow pay TV companies to import signals from network affiliates in other markets when negotiations with the local station break down. “Then you have the free market system working.”
UPDATE, 11:00 AM: AMC Networks tells me that CEO Josh Sapan didn’t mean to leave an impression that he might help digital streaming services – and therefore promote pay TV cord-cutting — if Dish Network drops his channels. He really meant that he would only consider helping another traditional pay TV provider when he responded to a question about how he’ll deal with “other distributors who might want to capture subscribers who want access to (AMC’s) programming.” His answer: “We think that the potential absence of our service and services on any platform by definition creates a sort of competitive opportunity for another platform. It is a very competitive world for multichannel video. So we’ll watch it as it goes. Of course, we’re contemplating it and making all sorts of contingency plans.”
PREVIOUS, 8:40 AM: Talk about Mad Men, or even Walking Dead: AMC Networks CEO Josh Sapan vaguely hints this morning that he might promote pay TV cord-cutting if Dish Network follows through with its plan to drop AMC, IFC, WeTV, and Sundance Channel in June. Sapan’s making contingency plans, and they apparently include offering more programming to a streaming service — in effect, encouraging consumers to cancel their pay TV subscriptions. Dish’s decision “creates a competitive opportunity for another platform,” Sapan says. “AMC is among the most critical services one can have to succeed” in pay TV and in the streaming world. “We’re in a fairly strong position.”
It was a pointed rebuttal to Dish Chairman Charlie Ergen’s damaging comment early this week that he plans to drop AMC’s channels because set top box data shows they have low viewership — suggesting that other pay TV providers also might consider them expendable. Sapan says that’s bogus. “We think today AMC in particular is one of the most popular services on the television dial.” The real issue, he says, is that Ergen wants to force AMC to scrap its 4-year-old $2.5B breach of contract suit which involves Dish’s decision
Dish Network Chairman Charlie Ergen told analysts last month that he might scrap his efforts to buy TerreStar Networks and DBSD North America — which control coveted spectrum licenses — if the FCC didn’t grant a waiver relaxing its build-out requirements. But he just closed the deals, even though he lost that battle as the FCC develops rules for the spectrum that would apply to everybody. Ergen has said that Dish needs spectrum to move away from being just a satellite TV service. If he offers wireless broadband, then it could ensure that he wouldn’t be held hostage by cable operators as Dish-owned Blockbuster develops video streaming initiatives. He can always change his mind: If Ergen wants to get rid of the spectrum, AT&T or DirecTV probably would buy in a heartbeat. Dish shares are down 1.1% in early trading. Here’s the announcement:
Dish is up 9.1% in afternoon trading partly based on a theory that the satellite company is in AT&T’s sights now that it has abandoned its effort to merge with T-Mobile. Stifel Nicolaus’ Christopher King is among the analysts who say that it makes sense: AT&T craves spectrum, but it has few places to get it. The Justice Department and FCC nixed the idea of a merger with another wireless phone company. Cable operators also are out after their recent agreement to sell the spectrum they control to Verizon Wireless. That would seem to leave Dish, even though it was one of the loudest opponents of AT&T’s deal with T-Mobile. Dish founder Charlie Ergen has been amassing spectrum — including some in the 700 megahertz band, which is where AT&T is building its 4G network — to help create his own national broadband and video-streaming service. The satellite company has said that it would like to find a partner to help pay for his ambitious plan, and identified T-Mobile as a possibility. And even though Ergen says Verizon and AT&T need another competitor, he didn’t rule out a deal with AT&T when asked last month about the possibility. “If the merger is not allowed then it could be” an option, he said in a conference call with analysts.
Big Media 3Q Corporate Earnings Roundup: Are CEOs Really Worried About Recession? Or Just Looking For Convenient Excuse?
Three months ago, when Big Media CEOs wrapped up their 2Q earnings, they were still relentlessly upbeat about the business. Any worries about the economy? Not then. But the messages they delivered over the past few weeks, as they discussed 3Q, were different. Although they’re still optimistic — remember, they’re paid to be salesmen — now and then you could hear expressions of concern about where things are headed. It stood out when Viacom CEO Philippe Dauman noted that “ad sales growth will face some headwinds.” Other CEOs who are known for speaking bluntly warned that other shocks may bedevil the business. For example, Dish Network Chairman Charlie Ergen said that his satellite company — and others in pay TV — have to fight harder against rising programming costs because “there’s a limit to the price increases that could be passed on to consumers.” Time Warner Cable CEO Glenn Britt warned that premium channels such as HBO, Showtime and Starz “are clearly impacted by the economy as consumers try to cut back.” Either they’re genuinely worried, or they want a scapegoat to blame for things that are going bad, or may soon do so. Whatever the case, we can expect to hear a lot more about the economy when it’s time for the post-mortem on the all-important 4Q earnings.
As for industry performance matters, parents of movie studios had their usual mixed results to brag about or explain away: Time Warner benefitted from Harry Potter And The Deathly Hallows Part 2. Viacom was up on Transformers: Dark Of The Moon. And News Corp beat its chest about Rise Of The Planet Of The Apes and X-Men: First Class. But Disney’s Cars 2 was no match for last year’s Toy Story 3. Comcast’s Universal Pictures had nothing to compare to last year’s Despicable Me. Lionsgate suffered from Conan The Barbarian and Warrior. And DreamWorks Animation’s Kung Fu Panda 2 didn’t contribute as much in the quarter as Shrek Forever After did in the same period last year.
Over at the TV networks, Comcast’s NBC underperformed the Street’s already modest expectations. Execs at almost all the companies were eager to talk about the cash they expect to collect soon from political ads — as well as their favorite new ATM machines: retransmission consent deals and digital streamers including Amazon, Hulu, and Netflix. Speaking of Netflix, CEO Reed Hastings once again tried to reassure investors that he’s focused on “building back our reputation and brand strength” after his decision in July to slap a 60% price increase on customers who wanted to continue to rent DVDs and stream videos. In 3Q Netflix lost 57.7% of its market value and 800,000 subscribers. And since that customer loss was bigger than projected, Netflix shares continued to fall — they’re now down 67.3% since July 1.
Here are some other themes from the latest earnings reports:
Ad sales: They’s good, but for how long? Most television networks report that scatter prices are comfortably above the upfront market from this past summer. CBS chief Les Moonves says prices in 4Q are up by “mid-teens” on a percentage basis, while Discovery says it sees least high single digit percentages. But Disney’s Bob Iger noted that scatter prices have “slowed slightly these last few weeks.” Kurt Hall of National CineMedia — the leading seller of ads in movie theaters — was far more direct when he spoke to analysts after ratcheting down his company’s financial forecasts. “I’m sure that the broadcast and cable guys are sitting there now counting their lucky stars they got their upfront done before August,” he told analysts. “There’s a lot of uncertainty.”
ESPN is already starting to face a major backlash from pay TV providers and some Wall Street analysts to yesterday’s $15B deal extending its rights to Monday Night Football for eight years to 2021. The …