EchoStar’s Ergen Believes DTV Transition Will be Pushed Off
The founder of EchoStar says he “wouldn’t bet the ranch” that the DTV transition will happen on schedule. Charles Ergen said he believes politicians will blink as the Feb. 18, 2009, deadline approaches. “No politician is going to want to take the oath of office” with people about to lose their TVs, he said. The digital transition helps EchoStar’s Dish network, because cable has to move customers from analog to digital before they can take advantage of digital and HD programming, he said.
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The 700 MHz auction will affect whether the transition gets delayed, Ergen said. EchoStar hasn’t decided whether to participate in the auction. It was waiting for the text of the rules the FCC adopted July 31. It’s “going to take billions of dollars to participate and we aren’t going to know the rules for some time,” he said. The FCC released the text of the rules late Friday.
Though the 700 MHz spectrum has been billed as being prime for wireless broadband, “it is not clear that the digital broadcast satellite/DBS providers have to have their own broadband path, Ergen said. If a third broadband pipe emerges, that will commoditize high- speed access, Ergen said, making it “unclear that the return on a broadband pipe will be as good as the return on our video product.”
The recent downturn in the housing market will hurt cable before it hurts DBS, Ergen said, because cable is the incumbent provider. Ergen appeared more worried about the problems with the sub-prime loan market. “With the problems in the sub-prime market, people are moving out of houses, and you have a cable connection or a dish hanging on a house, but nobody is living in the house,” he said.
EchoStar’s Dish network became the third largest pay- TV provider during Q2, it said. It added 170,000 subscribers, net, during the second quarter, making almost 13.6 million total, it said. EchoStar rates customers so it can determine how much to invest to keep them, Ergen said. “All customers are not created equal,” he said. The rating is based on how long customer have subscribed, how much they pay EchoStar and when they last upgraded, he said. “A customer that spends $100 per month that has been with you for seven years is more valuable than a customer that spends $29.99 per month that has been with your six months,” he said.
When Major League Baseball switched to DirecTV, EchoStar didn’t lose a significant number of the customers who had subscribed to its baseball package, said President Carl Vogel. The switch had a “small incremental impact” on the 50,000 MLB subscribers, he said. EchoStar didn’t renew because the contract that MLB proposed “forced us to carry a network that we hadn’t seen, in a package that was too costly,” he said.
As EchoStar battles DirecTV for HD subscribers, Ergen continues to believe there aren’t 100 channels of quality HD programming. “There are not 100 channels of HD TV that I would watch today,” he said, acknowledging that 100 “was a good round number” for DirecTV’s advertising purposes. “There are probably only 30 or 40 HD TV channels.” DirecTV has said it will offer 100 HD channels by year- end. (CD Aug 10 p6) (See separate report in this issue.) It’s up to programmers to come up with compelling HD programming, Ergen said, specifically mentioning Discovery and its “Planet Earth” HD offering.
EchoStar’s quarterly revenue was $2.76 billion, up nearly 12 percent year over year. Net quarterly income was $224 million, compared to $169 million a year earlier, it said.