Dish’s Ergen Says Satcaster Has Critical Mass of OTT Deals, Eyes Launch by End of 2014

Exec says over-the-top offering is an 'experiment,' and says he doesn't know if Dish can make money on it

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Dish Network chairman Charlie Ergen said the company has landed over-the-top rights deals with several programmers — in addition to Disney — for a viable Internet TV service, but said the satcaster is looking for more partners and expects to launch near the end of the year.

Dish sees an opportunity to market a slimmed-down TV package to “cord nevers” or cord-cutters who are loath to pay $100 per month for a standard pay-TV service, Ergen said on the company’s first-quarter 2014 earnings call. The satcaster is aiming at a price point for the bundle of $20-$30 per month, with a package that appeals to urban adults 18-35.

“OTT is an experiment,” Ergen said. “It’s a skinnied-down version of pay TV targeted at a different class of people that we don’t believe we or Disney are getting today.”

While the goal of the initiative is to generate incremental revenue on top of Dish’s traditional satellite TV biz, Ergen said he isn’t sure whether Dish can make money on the offering. “OTT is not going to move the needle this year for anybody,” and probably won’t in 2015, Ergen said. “It’s a precursor to where we think the industry is going.”

SEE ALSO: Disney Deal Gives Dish the Rights for a Virtual-MSO Foray

Ergen didn’t identify which programmers Dish has signed deals with. “We wouldn’t launch with Disney channels alone… We would want to have enough critical mass between general entertainment and sports and children’s (programming) to launch (and) we believe we have enough to do that,” he said.

In March, Dish reached a broad, multiyear distribution pact with Disney, which included unprecedented rights to offer linear and video-on-demand content from ABC-owned broadcast stations, ABC Family, Disney Channel, ESPN and ESPN2 as part of an Internet-delivered TV service.

The Dish OTT service will be accessible on a range of devices, including smart TV, Google Chromecast, Roku boxes, videogame consoles and Kindle Fire tablets, according to Ergen.

The Internet TV service can make more money for programming partners — and Dish — by being able to narrowly target interactive ads to users, said Ergen. It also reinforces Dish’s wireless strategy, as the company has spent six years amassing spectrum for mobile Internet services, he said. As for whether the Dish service might incorporate other OTT services, like Netflix, Ergen said the company hasn’t made the decision yet.

Other companies developing virtual pay-TV services delivered over the Internet include Sony, which announced plans at 2014 Consumer Electronics Show to launch a trial of a service combining live TV and streaming VOD services like Netflix in the U.S. later this year.

Ergen compared OTT to the state of dial-up at the dawn of the Internet. Dish wants to get ahead of the curve so it can adjust to the changing dynamics in the TV industry, as pay-TV subscriber growth levels off or declines. “It’s a bit like the lobster that gets boiled… which is, you don’t really know you’re dead and boiled until too late,” he said.

While the Dish OTT service will include VOD content, fast-forwarding will be disabled so that users can’t skip ads. It also will be limited to a single video stream per subscriber, under the terms of Dish’s agreement with Disney.

Also on the call, Ergen reiterated his concern about Comcast’s $45 billion bid to acquire Time Warner Cable, which he said would be an “unprecedented consolidation of broadband” that would create a “virtual monopoly” in the market. Asked if Dish will oppose Comcast-TW Cable deal, he said: “We’re not opposed to being opposed to something if it’s not the right thing to do.”

Meanwhile, Ergen addressed the reported talks between DirecTV and AT&T, which is exploring a $40 billion or more acquisition of the No. 1 satcaster. DirecTV has hired Goldman Sachs to advise it on the AT&T offer, the Wall Street Journal reported.

The Dish chairman said “We have no shot” in outbidding AT&T or Verizon for DirecTV. “We don’t want to pay a value for something that’s purely financial, not strategic,” he said.

For Q1, Dish added a net 40,000 TV subscribers, versus analyst estimates of 31,000. The company posted quarterly revenue of $3.59 billion, up 6.5%, largely driven by pricing increases, in line with Wall Street expectations of $3.57 billion. Q1 2014 net income was $175.9 million, down 18% from the year-earlier period.