Satcaster chairman leaves door open for potential merger with DirecTV, saying regulatory environment has shifted

Dish Network chairman Charlie Ergen said large media companies are “essentially monopolies” whose market power is pushing pay TV providers toward consolidation — and added that a merger with DirecTV “makes a lot of sense strategically.”

“You have a general momentum, a gravity toward consolidation because programming rates are going up four times the rate of inflation,” said Ergen, speaking on Dish’s second-quarter earnings call Tuesday.

The largest TV programmers — Ergen didn’t name them, but they include 21st Century Fox, NBCUniversal, Time Warner Inc. and Walt Disney Co. — are “really in a way monopolies.” Despite rising programming costs, he said, “Congress really hasn’t done anything to level the playing field.”

Ergen discussed the possibility of a merger with DirecTV, saying the regulatory landscape has changed with the rise of Internet video providers and competition in traditional pay TV from telephone companies. Dish (then EchoStar Communications) reached an agreement to acquire DirecTV in 2002, but the Federal Communications Commission nixed the deal.

“I think the marketplace is probably fairly attractive for consolidation in the video business,” he said. “That may happen in cable first, and that might force the satellite guys to look at different things.”

Others in the pay TV industry have talked up consolidation recently, specifically to gain scale on the programming acquisition front. Those include Liberty Media chairman John Malone, whose company owns a 27% stake in Charter Communications and has been exploring a union of Charter with Time Warner Cable or other operators.

On the call Tuesday, Ergen addressed a possible DirecTV-Dish merger, saying that “there’s no question that putting Dish and DirecTV together makes a lot of sense…. from a regulatory point of view that’s more achievable today than it’s ever been.”

Continued Ergen, “We’re not married to any particular strategy if events change.” Dish could sell its wireless spectrum holdings, at which point its strategy would be aligned with DirecTV, he said.

DirecTV topper Mike White, on the company’s earnings call last week, said “I think it always takes two to dance” when questioned about a tie-up with Dish. He added that Dish is “somewhat different directionally from our views on strategy.”

Ergen, asked about the ongoing Time Warner Cable-CBS dispute over retransmission fees, noted that CBS is blocking the cable operator’s broadband customers from accessing full episodes on CBS.com. “That bothers us that (our customers) could be brought into the fray,” he said.

Dish is in the middle of its own retrans spat, with Raycom Media’s 53 TV stations dark in 36 markets for the satcaster’s customers.

Ergen said he didn’t believe Dish’s Hopper DVR, which allows customers to automatically skip ads on the big four broadcast networks and was sued by those broadcasters, is factor in retrans negotiations.

Retrans is “an ongoing thing for everybody… It’s nothing new to us,” he said.

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