Providers of streaming services such as DirecTV Now and Sling TV typically try to calm the fears of programmers that like the lucrative traditional pay TV bundle by saying that they aim to supplement, not replace, it. But Dish Network CEO Charlie Ergen doesn’t buy that anymore.
The so-called over the top (OTT) services are “becoming a direct replacement for cable and satellite,” he said in a call to discuss his company’s Q4 performance. And programmers who want to keep the traditional pay TV bundle — long the industry’s cash cow — need to adapt.
“If they continue to raise prices, [and] continue to have 16 to 18 minutes of advertising per hour … then that deceleration will increase,” Ergen says. The OTT world “is more consumer-friendly.”
In response to a question, he said Viacom CEO Bob Bakish is “wise” to focus on six main networks. Others who continue to invest in lots of small channels are “going to get eaten up” as distributors craft smaller bundles.
Dish’s Sling TV aims to take advantage of consumers’ growing interest in digital. It’s about to face competition from the live streaming service planned by Hulu, owned by major programmers Disney, Fox, Comcast and Time Warner.
“We already have to some degree programming partners competing with us, especially on the premium side” with services such as HBO Now, Ergen says. “I don’t view that as a positive.”
But Sling TV CEO Roger Lynch says that he didn’t see “any change in momentum” for his service in December after AT&T introduced DirecTV Now. “We’ve been expecting more competition for quite a while. … The market just expands faster.”
He also isn’t fazed by the launch of network-specific services such as CBS All Access. “People put together their own bundle,” he says. “We’re trying to tap into that” by starting with a comparatively low base price of $20 a month.
Ergen declined to say how many people subscribe to Sling.
The company also said it can’t discuss what it’s doing in the FCC’s spectrum auction.
With its satellite and spectrum holdings, Dish’s name frequently comes up in merger talks — including with wireless companies such as T-Mobile and Sprint.
“We’re not going to drive that process,” Ergen says. “But the assets that we hold could be involved in that mix” if others want to do a deal.
Still, he aims to build something “organically” with his spectrum. “We do not need to do an M&A transaction” to satisfy the FCC’s build-out schedule.
Dish shares are up about 1% today after it reported generally encouraging Q4 results. Earnings at 70 cents a share beat analyst expectations for 66 cents, though revenues, at $3.72 billion, fell short of their target for $3.76 billion.
But subscriptions — which include Dish and Sling — were up by 28,000, surprising many who anticipated a loss. The result suggests that Sling “is surprisingly strong, given the launch of DirecTV Now” in the quarter, Evercore ISI’s Vijay Jayant says.