Dish’s Ergen Backs Away From Day to Day

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Dish Network chairman Charlie
Ergen surprised the TV industry by stepping
down last week as the satellite giant’s CEO,
naming former Sirius Satellite
Radio chief Joe Clayton
as his replacement.

While Ergen will stay
firmly in control as chairman
of Dish, Clayton has
some definite ideas on how
to run the day-to-day operations
of the company.

In an interview last week,
Clayton said his first priority
is to concentrate on the nuts
and bolts of the business to
allow Ergen to focus more on
his strategic vision for Dish.

“I’ve been watching what
Charlie has been doing,
putting this amalgamation
of assets together,” Clayton
said. “I’m here to help run
the day-to-day operations.
My job and my challenge
is to improve the financial and commercial
performance and save some time for Charlie
to help put the grand vision together and
complete the puzzle.”

ACTIVE BUYER

Dish has been on a buying spree lately — in
March, it purchased hybrid satellite and terrestrial
communications company DBSD North
America, and last month, it closed on its $320
million purchase of video-rental chain Blockbuster.
Sister equipment company EchoStar
also purchased broadband-service provider
Hughes Network Systems in February.

Some analysts have speculated that Ergen’s
ultimate vision — which the chairman has jokingly
called his “Seinfeld strategy” — is to utilize
the wireless spectrum for a broadband play
and transform Blockbuster into a Netflix rival.

Clayton wasn’t giving specifics
or making any new product
announcements. But he said that
as CEO, he will look to develop a
broadband offering and investigate
ways to capitalize on Blockbuster.

“At the end, we want something
that makes all of our businesses
better,” Clayton said. “That chapter
is still evolving. A lot depends
on the technology landscape, the
financial landscape and the availability
of assets. That’s what Charlie’s
charter will be as chairman,
as owner, as the largest shareholder
and founder. We don’t want him
worrying about cutting the grass
around here.”

That could include investigating
the possibility of a video
and data pairing, the potential of
which he said attracted him to Dish in the first
place.

“We’ll look at digital distribution and we’ll
look at physical distribution,” Clayton said.
“You’d be remiss if you didn’t. Hughes Networks
has broadband services. Obviously, we’ll look at
that as part of our offering. Maybe I’m being too
simplistic, but when I look at the pieces, I can
quickly come up with an offering.”

Clayton said this is his third turn as CEO of a
subscription-based revenue company — he was
CEO of Frontier Communications before joining
Sirius — so he is no stranger to the business.

After a rough couple of quarters last year —
Dish lost subscribers in three of four periods in
2010 — the satellite giant gained 58,000 customers
in the first quarter and showed stronger than
expected fi nancials. Clayton said he hoped to be
able to continue that momentum.

“This for sure is not a turnaround,” Clayton
said. “This is a growth story.”

As for his top priorities, Clayton said he
would concentrate on branding, commercializing
technology, maximizing distribution
and looking for alternative distribution
models that will drive subscribers.

“I’m also big on market segmentation,”
Clayton said. “That’s how you find the nuggets
sometimes.”

POWER SHARING AN ISSUE

Ergen has a somewhat shaky track record in
sharing responsibility — former chief operating
officer Michael Neuman lasted just eight
months on the job — but some analysts believe
this situation may be different.

“I think Charlie is happy about delegating the
blocking and tackling aspects of the CEO job; he
remains both chairman and primary owner,”
said longtime Ergen watcher and Wunderlich
Securities analyst Matt Harrigan. “He’s likely to
focus on a business plan for wireless, focusing
on [the] Seinfeld angle of pulling all the strands
together at the last minute.”

Pivotal Research principal and media and
communications analyst Jeff Wlodarczak wrote
in a research note that no matter the title shift,
Ergen is still firmly in control of Dish.

“Our opinion on Joe Clayton’s track record is
frankly mixed, given our experiences when he
operated Sirius, but we remind investors that
Dish begins and ends with Ergen and we continue
to believe he will play a very hands-on role
in the operation of Dish, of which he remains by
far the largest shareholder,” he wrote.

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