Sling TV CEO Departure Raises Eyebrows

Roger Lynch's move to Pandora rekindles speculation about Dish’s future

Sling TV CEO Roger Lynch’s departure for streaming music service Pandora raised eyebrows, but whether or not the move is part of a larger strategy to prepare parent company Dish Network for a sale or just an opportunity for the executive to run his own company is still up in the air.

Lynch helped launch Sling TV in 2015 and grew it into the biggest U.S. over-the-top video service, with an estimated 1.45 million subscribers.

That Lynch — who had been with satellite-TV provider Dish since 2009, spearheading its international OTT service DishWorld (now Sling International) – would leave just as the OTT train was gaining steam, seemed odd to at least some pundits.

But not everyone was convinced that there was more behind the departure than Lynch realizing there was more opportunity with Pandora. Dish chairman and CEO Charlie Ergen is famous for being a hands-on executive, and maybe Lynch decided there was more opportunity at the music service. He has more than a passing interest in music — according to CNBC, Lynch plays lead guitar in a classic rock cover band called The Merge. Maybe he saw Pandora as his big break.

Big Raise at New Job
He will definitely be well-compensated. According to documents filed by Pandora with the Securities and Exchange Commission, Lynch will be eligible to receive salary, bonus and restricted stock awards worth about $13 million as CEO, about three times the $4 million in compensation he received from Dish last year.

Lynch officially leaves on Aug. 31 and his duties will be assumed by Dish chief operating officer Erik Carlson, who already has a full plate in charge of day-to-day operations at Dish, including human resources, operations and information technology, media sales, marketing, programming, product management, acquisition and retention, finance and accounting organizations.

“I want to thank Roger for his leadership over the past eight years, creating and defining the country’s first live OTT service,” Ergen said in a statement.

Pandora was one of the first streaming music services, but has fallen on hard times lately. In June, Liberty Media-controlled satellite radio service Sirius XM agreed to invest $480 million in Pandora, which would give it a 19% stake in the company. That doesn’t give Sirius XM a controlling interest in the streaming music service but it gives them influence: Sirius XM gets to name the company’s chairman and three members to the board of directors.

Dish has been the subject of takeover speculation for months, as its satellite-TV subscriber numbers continue to fall. It has subtracted an estimated 285,000 net satellite subscribers in the second quarter and 2.2 million since early 2015, per MoffettNathanson principal and senior analyst Craig Moffett.

Couple that with a looming deadline to build out Dish’s vast wireless holdings to reach 70% of the U.S. population with an operating wireless service by 2020, and there are more than enough incentives to do a deal.

Sling TV continues to add customers. According to Moffett, Sling TV added an estimated 89,000 subscribers in the second quarter, nearly double the 49,000 it added in the prior year.

Dish has been down this road before. In the first quarter of this year, when it reorganized its corporate structure, absorbing sister company EchoStar’s 10% stake in Sling TV and certain wireless licenses the equipment maker held, many saw that as a move to ready the company for a potential sale.

Adding to the speculation is Verizon Communications’s declaration that it is still evaluating plans for an over-the-top service, with a holdup being that it has encountered some difficulty in securing digital rights from some programmers. Adding Sling TV to the stable would seem to solve that problem in one swoop. Telsey Advisory Group media analyst Tom Eagan was unsure what Lynch’s departure ultimately means, noting speculation around the company has been high for months.

Eagan wasn’t convinced a Dish deal would be that appealing to Verizon in that the additional spectrum wouldn’t help its 5G rollout — it needs wireline assets for “backhaul” more than spectrum — and said it would likely present more problems than it will solve.

Spectrum Not a Bid Draw
“It does appear to indicate that there is something changing at Dish,” Eagan said of Lynch’s departure, adding that doesn’t mean it is something that would warrant buying the stock.

Dish investors seem to feel the same way. Dish shares closed at $58.15 on Aug. 15, down 57 cents each or about 1%.

There is no doubt that viewership habits are changing. Earlier this month The Walt Disney Co. announced plans to launch a direct-to-consumer version of flagship sports channel ESPN (although sans any content carried by its linear channels) in 2018 and a Disney-Pixar direct-to-consumer offering in the following year.

Verizon has toyed with OTT and direct-to-consumer options over the years — it launched an ad-supported, short-form video service go90 in 2015 that has gained little traction with the younger audience to which it is targeted. But that doesn’t mean it should stop trying.

“I don’t think this has anything to do with a deal,” said one member of the financial community who asked not to be named. “Not that a deal might not happen anyways.”