The satellite company’s Hopper DVR ”has evolved from a plain old set top box to….the hub of the electronic home” — and soon will monitor and automate household functions — Dish Network CEO Joseph Clayton said today at the International CES confab. Dish used the platform to unveil several enhancements including an ability to record eight shows at once (if as many as four are major broadcasters), and watch four simultaneously. Users also can download programming to mobile devices, and integrate Hopper services with Sony’s PlayStation 3 and 4 models as well as with certain LG TV sets and Amazon’s Kindle Fires. Hopper apps already work with Android and Apple devices. The beefed up Hoppers likely will further infuriate broadcasters who are suing Dish, alleging that the DVRs breach copyrights with their ability to automatically skip over ads in recorded programs. (Dish says consumers already can zap ads with their remote controls.) The company says that improvements in the Hopper’s Sling technology will enable users to stream live and recorded shows, including with the ad skipping capability, both inside and outside the home. Many programmers want distributors to pay extra for those TV Everywhere capabilities. The Sony game consoles and LG TVs will be able to integrate with the Hopper wirelessly via an app as long as they’re on the same wifi network. The iPad app also now will be able to respond to voice commands to find …
This was already destined to be an interesting day for Dish Network as it prepares its annual presentation at the International CES confab in Las Vegas to unveil expanded services for its Hopper DVR and Sling Internet streaming box. But the most important development so far was out of its hands: T-Mobile effectively raised the value of airwave spectrum — which Dish has been amassing — by agreeing to a $3.3B deal to acquire a swath of 700 MHz A-Block rights from Verizon. (T-Mobile will pay $2.4B in cash, and swap some of its spectrum valued at $950M.) The transaction should improve T-Mobile’s reach in nine of the 10 largest markets and “represent(s) our biggest move yet in a series of initiatives that are rapidly expanding our already lightning fast network and improving its performance across the country,” says the company’s dynamic CEO John Legere. But the news also nudged up Dish shares to touch $58.48, the highest they’ve been in more than a decade. Using the T-Mobile deal as a benchmark, Dish’s spectrum rights are probably worth $21.4B, Wells Fargo Securities analyst Marci Ryvicker estimates — up from her previous estimate of $14.9B. That “reinforces our belief that there is significant present and future value” in Dish’s holdings, she says. Chairman Charlie Ergen wants to build his own wireless broadband operation and last month announced a plan to team with Sprint for a test this year …
In this week’s podcast, Deadline’s executive editor David Lieberman and host David Bloom preview the upcoming Consumer Electronics Show, which David L. will be covering in Las Vegas.
Among the big trends the Davids say we can expect from the mammoth show: big, big TVs showing ultra-high-definition “4K” images; new technology from Google to help transmit that high-bandwidth video to screens of all sizes; and what this all will mean for cable TV companies, telcos, satellite TV providers, theatrical exhibition and Hollywood itself.
They also look at other likely areas of focus at the show, and preview appearances by the CEOs of Sony, Yahoo! and Twitter, and possibly even a new CEO for Microsoft, which is back on the show floor after last year’s surprising absence.
One in a series of Deadline stories that look back on 2013 and ahead to 2014.
Some of 2014′s most important sporting events won’t take place on a grassy field or an indoor court. They’ll play out in board rooms as TV execs continue their struggle to balance the diverging interests of those who love sports, and others who don’t — but still have to subsidize the programming as part of the pay TV bundle. Sports accounts for about 33% of cable and satellite company programming costs, Barclays Equity Research’s Kannan Venkat estimates. That percentage will grow: Sports prices are rising about 10% a year while other channels rise about 7%. DirecTV CEO Mike White says consumer frustration could soon begin to boil. “There’s a point where you have to stand up for the 99% who are angry about their bills.”
Will 2014 be the year when distributors make a serious effort to slow their rising sports costs? It’s possible, especially in dealings with regional sports channels — particularly in Los Angeles. Time Warner Cable is about to introduce a service for Dodgers games, SportsNetLA, following its launch last year of SportsNet and Deportes which show Lakers games. The cable company is said to want other distributors to pay $5 per subscriber per month for the Dodgers, roughly the same price MSG charges for its regional service that offers the New York Knicks and Rangers. But so far other distributors have not stepped up to the plate. DirecTV could help everyone hold out; the No. 1 satellite company has led the charge against high-priced regional sports networks. It declined to carry the Pac-12 Network which is home to two schools (UCLA and USC) in the key LA market, the University of Texas’ Longhorn Network, and Comcast-owned sports services in Portland, Philadelphia and Houston. (The Houston network filed for Chapter 11 bankruptcy protection in September.)
Looks like the companies have buried the hatchet after Dish Network’s failed challenge this year to bids by Japan’s SoftBank for Sprint Nextel and Clearwire. Dish and Sprint said today that they will jointly test a fixed wireless broadband service in Corpus Christi, Texas that they expect to make available in mid-2014 “with a plan to expand into additional markets in the future.” Dish will offer customers an outdoor router or “an indoor solution” with high-gain antennas that can access the Internet via the 4G TDD-LTE signal on Sprint’s 2.5 GHz spectrum. Dish-watchers will be eager to see how well the companies get along. The No. 2 satellite provider has yet to fully explain what it will do with the wireless spectrum rights it has been amassing — and has said that it probably would need a partner to help fulfill its plans. Dish has spent about $3B on spectrum, and wants to acquire more. Wells Fargo Securities’ Marci Ryvicker says it’s a good business opportunity since as many as 20M homes are “underserved by wired broadband.” But she adds that “the biggest takeaway” is the partnership itself, which signals “a potential start to a new relationship.”
When it lost a summary injunction back in September, the network said it wasn’t done trying to get Dish Network’s Hopper service shut down and today ABC took another swing at it. In a brief dated November 12 and filed today (read it here) with the Second Circuit Court of Appeals, ABC and Disney Enterprises went after the satellite provider’s ad-jumping DVR service again. The thrust of the network’s new appeal is that U.S. District Judge Laura Taylor Swain not only misunderstood the market harm the service poses but misinterpreted copyright law in her ruling earlier this fall that it was not Dish but the consumers, by choosing what to record, who were actually engaged in the process of making copies of programming that they then could watch ad-free later. In its heavily redacted brief, ABC says that “by exercising exclusive control over the copying process and by operating the service to record” with the Hopper’s Primetime Anywhere and AutoHop services, it is Dish who is really in control of the process not the consumer.
The CBS chief is taking Dish Network Chairman Charlie Ergen at his word after he said this week that there’s a way for broadcasters to benefit from his Hopper DVR, which automatically zaps ads on recorded shows. “We’re very flexible. We’re willing to negotiate,” Les Moonves told investors today at the Guggenheim Securities TMT Symposium. Calling Ergen “a very smart man” he says “if there’s a way to do this that benefits everybody, we’re very open to it.” But the bottom line has to be that “we need to get paid for our content…. We spend $4M an episode for NCIS. I have to pay for it.” Broadcasters have sued Dish alleging that the Hopper infringes on their copyrights; Dish counters that it simply automates the ad skipping that DVR viewers already do. The fate of the device is an issue in Dish’s current program carriage negotiations with Disney. Ergen says the Hopper “has built-in technology that can target commercials to customers in a better [way]” and “give the broadcaster more revenue” — although he added that “it’s not a proven concept yet.”
Don’t include Charlie Ergen among the small but growing group of industry watchers who believe cable and satellite companies could soon face competition from a company that offers a similar bundle of channels via the web. “It’s going to happen at some point in time,” the Dish Network chairman told analysts today. “But most programmers have been hesitant to embrace that kind of dramatic change. In the short term, it’s unclear that that’s going to happen.” Intel is one of the companies that wanted to become an online power — but now hopes to sell its venture, called On Cue. Verizon and Liberty Media are said to be interested. Dish isn’t. “We’re not in any discussions with Intel about their over-the-top product,” Ergen says. Still, he evangelized about the value of keeping one’s options open. Although “we’re not trying to drive over-the-top,” he says that “if things are going to change, then we want to be involved with it.”
Dish Network’s chairman seems to be in sync with Disney CEO Bob Iger’s comments last week: Both execs say that they’re making progress toward a new program carriage agreement with Charlie Ergen telling analysts today that he’s “cautiously optimistic that we’ll get a deal done.” The companies agreed to keep talking, without a programming black out, at the end of September when their previous deal expired. Everyone’s been waiting to see how the companies would fare: Disney’s one of the broadcasters that sued Dish after it introduced its Hopper DVR which can automatically jump past ads in recorded programs. “Disney has not been one of our best relationships and part of that is my fault,” Ergen says. He wants to change that. “Otherwise it doesn’t make sense. I’m getting too old to do business with people we don’t have a good relationship with just to make a buck….You don’t marry everyone you date. And Disney’s a very pretty girl.” As for the talks, “there’s always economic issues,” Ergen says. But they’re also looking at a lot of what-if questions regarding the future of television because Disney likes long term deals. “We don’t want to have to go back to Disney to ask permission to do something,” Ergen says. Since Disney is “further along in the technology curve” it’s been “a great negotiation because it’s forcing us to think of things.” And the Hopper isn’t a big …
The Marvel characters to be featured on Netflix in the four-series deal the companies announced today are “not among the most popular,” Disney CEO Bob Iger just told analysts. Daredevil, Jessica Jones, Iron Fist, and Luke Cage ”were never going to become feature films.” But that could change if the shows planned for the streaming service catch on. That makes the agreement “great for Netflix” — and opens “a great opportunity for Marvel to create more brand value…There are more opportunities beyond our platform to produce product for.”
The Disney chief also urged investors not to fret about the long time it’s taking for the entertainment giant to work out a new program carriage deal with Dish Network. The companies agreed to keep talking — without any programming black out — at the end of September when their previous agreement expired. “Progress is being made,” Iger says. Still, a deal “could take some time.” That’s because the negotiations are less about the price for carrying traditional TV channels than they are about the fees and conditions for Dish to stream
Say good night to the Blockbuster night. The video chain that a decade ago made moguls tremble with its stranglehold on video rentals will be gone in January: Dish Network, which paid $234M to take Blockbuster out of bankruptcy in early 2011, said today that it will close the 300 remaining U.S. retail stores as well as its distribution centers. Blockbuster’s DVD-by-mail service also will end, though franchisees and licensed Blockbusters stateside and overseas will be unaffected. “This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment,” Dish CEO Joseph Clayton says. Dish will keep the Blockbuster brand and video library. It also will continue the Blockbuster @Home service it offers to Dish customers, as well as the Blockbuster On Demand transactional streaming service.
The companies said today that they have reached a short-term extension of their carriage contract to keep Disney‘s channels on Dish Network‘s systems. The sides say talks will continue on a contract first inked in 2005 and set to expire at the end of the month. At stake is the continued carriage of Disney networks including ESPN, Disney Channel and ABC Family and ABC-owned stations in New York, Los Angeles, Chicago, Philadelphia, San Francisco, Houston, Raleigh-Durham and Fresno. No other details were announced. The deal comes less than a month after Time Warner Cable and CBS settled their retrans dispute that cost TWC customers 32 days of CBS programming. That impasse was widely believed to be broken by the start of the lucrative NFL season, so it’s notable that ESPN has Monday Night Football in its corner. But Dish Chairman Charlie Ergen has been grumbling for months about the cost of sports rights and said in February that the loss of revenue from Dish’s 14.1M subscribers “would be a long-term problem for Disney”. Last year, Disney CEO Bob Iger defended ESPN’s price increases, attributing the growing complaints about sports costs to “a rough economy over the last few years”. Another wrinkle in the ABC-Dish standoff: The network is suing the satcaster over its ad-skipping Hopper DVR.
Liberty Media’s John Malone and other execs are pounding the drums for cable and satellite companies to merge — in part to help hold down their rising programming costs. You’d expect outlays to fall as big companies apply the relatively low rates they pay across a larger collection of subscribers. But International Strategy & Investment Group analyst Vijay Jayant says today that the net shift in value to distributors from programmers would not be meaningful. AMC Networks, Viacom and Fox likely would see the greatest loss in their values while CBS, Discovery, and Comcast’s NBCUniversal would see the least. (He looks at outlays for basic channels; prices for premium services, regional sports networks, and VOD likely wouldn’t be affected by mergers.) If Charter joins Time Warner Cable, the blended company would save about $532M in 2014 as monthly programming outlays for their estimated 15.4M customers fall to $27.92 per subscriber from $30.80. By 2018 the savings would rise to $903M as the combo paid $38.08 instead of $43.21 for 14.7M customers. If DirecTV merged with Dish Network the satellite companies could save $525M next year, with costs dropping to $33.99 per sub from $35.28 for 34.1M customers. …
Dish Network, its chairman Charlie Ergen and several Board members were slapped this week with a potential multi-million dollar complaint by shareholders. And they want him and the individual Board members to pay up personally. In a verified shareholder derivative filing (read it here) on behalf of all Dish shareholders, the pension fund of Daytona Beach Police Officers’ and Firefighters Retirement System allege that since April 2013, Ergen has quietly been buying up more than $1 billion worth of debt from bankrupt wireless network company LightSquared, who Dish has a bid in for. Besides this big potential personal windfall for the Dish founder and controlling shareholder, the four-count complaint filed in federal court in Colorado on September 26, says Ergen also used a front company to put in a $2 billion bid for LightSquared in May 2013 to push up the auction price. “Thus, with this substantial debt purchase not only did Ergen take for himself (in stealth-like fashion) a strategic opportunity that was otherwise available to Dish, he did so knowing that his personal risk was minimized because the Company’s strategic plans already included purchasing more spectrum,” says the dense and detailed complaint. On July 23 of this year, Dish put in a $2.2 billion bid for LightSquared’s assets after a committee the company formed to look into a conflict of interest by Ergen was suddenly disbanded by the Board two days before.
Judging by the tone of Michael White‘s comments to investors today, he’s souring on the thought of trying to merge the No. 1 satellite company with its chief rival Dish Network. At the beginning of August the DirecTV chief said that while it might take a lot of work to do a deal he’d “never say never.” But he just told the Goldman Sachs Communacopia Conference that “there’s no question it’s very challenging for any deal to get done” following the Justice Department’s decision last month to fight American Airlines’ plan to merge with US Airways. Some analysts thought that the companies might overcome government antitrust concerns by offering to use the airwave spectrum rights that Dish has amassed to build a national wireless broadband service. White says that conceptually “that would be a powerful argument,” but adds that “powerful doesn’t necessarily make the other [antitrust] issues go away.”