Dish's Ergen Foresees Industry Consolidation, Alternative Content Distribution

Dish Network Chairman Charlie Ergen -- whose company has 35-plus broadcast stations off the air in a fee dispute -- expects more blackouts, with programmers continuing to raise prices for carriage rights. Over time, he said the increases could bring industry consolidation, Congressional action or a rise in alternate methods to consume content such as Aereo.

Broadcast stations may even turn people off to the point where viewership declines, he said.

Momentum is building for cable operators to join forces -- and one major incentive is to achieve greater scale in negotiating retransmission consent deals with broadcasters. Ergen suggested that these developments have prompted satellite operators Dish and DirecTV to consider a partnership.

“Programming partners have gotten so powerful that their rates are going up four or five times the rate of inflation,” Ergen said Tuesday on a Dish earnings call.

Dish is in the midst of a widespread blackout of Raycom stations in close to three dozen markets, including Cleveland, Cincinnati and Memphis.

Ergen said he doesn’t think Dish’s Hopper DVR will play any meaningful role in negotiations with broadcasters, even as they are suing to stop its automatic ad-skipping functionality. The number of Dish’s 14 million-plus subscribers taking the Hopper continues to grow, although Dish has not provided specifics.

As Ergen has said before, Dish may have been a bit too aggressive at drawing attention to the ad-removal capability starting last year, but it is simply in line with consumer behavior and it's up to programmers and marketers to consider alternate ways of advertising -- notably in the addressable arena. “The train’s left the station -- customers skip commercials,” he said.

Dish has a carriage deal with Disney scheduled to end next month, where a renewal would be expected to include ESPN, local ABC stations, the Disney Channel and other properties. 

Dish CEO Joe Clayton said: “We’re moving towards a favorable solution for both parties. That’s the objective.”

Ergen suggested that a day may come where the cost to carry sports programming, such as ESPN, becomes so high that a distributor may just opt to market itself as a sports-free alternative at a lower cost. “Somebody, sometime may decide that sports isn’t something they have to have,” he said.

That would bring an initial loss in customers, Ergen suggested, but over the long term subscriber levels should return. “We’re prepared to go either way,” he said.

Clayton said Dish, which has a history of marketing itself as the low-cost alternative, is making a continued effort to attract more affluent consumers. Part of that includes a deal with Southwest Airlines to reach travelers. Dish is providing free access to live TV on some flights and placing its brand on all kinds of Southwest material, while the flight attendants apparently make announcements that point passengers toward Dish.

Dish has also been offering a free iPad 2 to new customers who sign up for the Hopper.

Dish lost 78,000 customers in the second quarter compared to the previous three-month period. Revenue rose slightly in the April-July period to $3.61 billion versus $3.57 billion last year. The company experienced an $11 million loss after a $224 million profit in the second quarter of 2012.

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