UPDATED with WarnerMedia statement: Even though Dish Network isn’t in the broadband or wireless business (yet), the company’s outspoken chairman, Charlie Ergen, sees the influx of new streaming services benefiting Dish and other pay-TV providers.
Ergen addressed the topic during a conference call with Wall Street analysts and the media a few hours after the company released its third-quarter financial results. Dish has been locked in a carriage dispute with HBO for the past year and over the summer hit an impasse with the regional sports networks owned by Sinclair Broadcast Group, which remain dark. Even without those two major programming elements, Dish reported a net gain of 148,000 subscribers in the quarter — a notable exception to the larger slide in pay-TV numbers across the industry.
In response to an analyst’s question about how HBO Max will affect relations with HBO, Ergen had plenty of thoughts. (WarnerMedia, owned by DirecTV parent AT&T, plans to launch the $15-a-month HBO Max service in May.)
“I don’t know everything they’re going to do with HBO Max, but I think it’s going to be a good product,” Ergen said. But by focusing on high-quality subscription streaming, he argued, media companies face a conundrum in their traditional pay-TV relationships.
“HBO was requiring, at least of us, a contract guaranteeing a certain number of subscribers,” he said. “Obviously, that’s difficult to do when you’re competing against HBO themselves, particularly if they stick a lot of their programming on HBO Max. It certainly will give leverage to distributors in future negotiations, as you might be able to get product from TNT or TBS or CNN or Cartoon Network on HBO Max.”
As the streaming wars escalate, Ergen continued, “it’s going to be really interesting to see how content providers navigate because people aren’t going to watch more TV, or not materially more, and there’s lots of great programming out there.”
HBO Max as well as new services like Disney+ and NBCUniversal’s Peacock (though he didn’t identify any of them by name) have considerable ground to make up in the streaming race, Ergen said.
“The best product in the country today is Netflix,” he said. “It’s not just content. It’s the fact that they’re kind of a virtualized network. … They’ve actually got most of their stuff in the cloud, so they’re actually more flexible and can deliver content more cheaply than anyone can do it. You gotta follow them, and where it goes, I don’t know. But it’s going to take a couple years to settle out.”
At another point during the call, Ergen said the company saved a considerable amount of money by not agreeing to higher contract terms with programmers like Sinclair and HBO. The decision, he said, resulted from internal analytics and also an instinct about where the TV bundle is heading. “As things go to streaming, we’re going to an à la carte world,” he said. As certain programming is shuffled from authenticated TV streaming apps to subscription services like Disney+, “that doesn’t increase their value to us,” Ergen said. “Obviously, that has to be taken into consideration in negotiations.”
As far as HBO, he said, “Our customers get HBO a different way today. They don’t have to get it from us. They can pirate it. They can use code sharing. They can get it through another distributor or from Amazon. Our customers will be able to get regional sports and local channels from Sinclair. They’re just going to get it a different way.”
Sports, long thought to be the linchpin of the traditional bundle, is also being rethought, Ergen said. “I would imagine even teams themselves will stream directly,” he predicted.
Founded in 1980, Dish is “so into the weeds with this business for so long. We just see the world a little bit differently than other people,” he conceded. “But we like to strike agreements that are good for both companies. … You have to make us leave kicking and screaming. HBO did that, and refused to negotiate a deal other than one where we would lose a significant amount of money. They had a strategic reason because they wanted to grow subscriptions at [sister company] DirecTV. They had Game of Thrones coming up, so they had a valid strategic reason for wanting to do that. That reason may not be out there anymore.”
WarnerMedia later said in a statement, “Dish made it apparent that they have no interest in carrying HBO. We made extremely reasonable offers and received no true level of engagement in return. They harmed their subscribers by removing our services from their platforms, which is an unfortunate and damaging tactic that Dish resorts to time and time again. To this day, we would be open to constructive talks that would lead to carriage of HBO on Dish.”