Ergen: Advantage Tilting Toward Distribution

Dish Chief Says Loosening Bundle Adding to Leverage

Dish Network chairman and CEO Charlie Ergen said as the programming bundle loosens, distributors are beginning to gain more leverage in carriage negotiations.

“In general I think the tilt has moved a little more in the distributor’s favor,” Ergen said on a conference call with media after Dish’s first quarter results. “The content owner still has some advantages and is probably a little stronger in negotiations than the distributor, but I think it has moved in the distributor’s direction some.”

Ergen said the advent of over-the-top services like Dish’s Sling TV and others, as well as a willingness by operators to weather long blackout periods, sliding ratings for linear  content and the difficulty in luring back lost viewers all play a role too.

“There comes a tipping point for content providers when it [programming costs] is $100 a month that you lose more subscribers that you gain,” Ergen said. “You start missing a whole generation and it’s hard to get them back.”

Ergen noted that there are channels in the top 20 networks that haven’t made it to Sling TV’s core $20 per month package and probably never will because “customers aren’t asking for them.”

Ergen added that showing a willingness to let a network go dark also helps at the negotiating table.

“When we get to distribution negotiations with providers, we’re armed with real data in terms of what effect it will have on our business,” Ergen said. “We knew Fox News was going to have an effect on our business, it was probably the No. 2 channel we didn’t want to take down as a company. But we’ll take anything down if it’s a horrible deal.”

Fox News Channel and Fox Business Network went dark for nearly a month from late December to mid-January on Dish and was a big factor – along with the residual effects of Turner Networks TNT and TBS going dark between Oct. 21 and Nov. 20 – in Dish’s loss of about 134,000 net subscribers in the first quarter. While Fox returned to Dish on Jan. 15,  Ergen said he would do it again if the deal terms warranted it.

“You have to be willing to take anything down if you get a horrible deal,” Ergen said. “I always tell my people if you take something down, be prepared to live without it forever. Otherwise don’t take it down. ESPN would be the No. 1 thing I wouldn’t want to take down. Fox News is probably No. 2.”

Dish has an upcoming carriage renewal with Viacom, the programming giant that has weathered long outages with Suddenlink Communications and Cable One, but would not comment on how talks are proceeding. However, like in past conference calls, Ergen noted that Dish has a long history of cordial talks with the programmer.

“We have had a great long-term relationship with Viacom and they are a valued partner,” Ergen said. “We just did a deal with Epix [Viacom’s premium movie channel]. Obviously the distribution of their content is a bit more diluted now. If you’re a Netflix customer and you can watch SpongeBob, maybe you don’t place as big a value on it on the linear side. It depends on the strategic direction of how content players go. Viacom is fairly well distributed on most platforms out there. We have to take that into consideration when we look at it for our platform.”