Dish Network's 'Seinfeld' Strategy
Charlie Ergen should get a lot more attention than he does. It isn't clear whether this attention should be positive or negative, but really, who cares. Just pay more attention to the guy! You will be rewarded.
Ergen is the co-founder, majority owner and chairman of satellite-TV provider Dish Network and its much smaller manufacturing and commercial-services sibling EchoStar. He’s No. 35 on the Bloomberg Billionaires list of the world’s richest people, with a net worth estimated today at $21.1 billion, which is in itself a bit of surprise for those of us who haven’t been paying close attention. I had figured him to be the third wheel of a Denver self-made-billionaires trio led by Phil Anschutz and John Malone, but no, thanks to a seven-fold rise in Dish Network's stock price over the past six years Ergen is now worth more than the two of them combined.
It’s what Ergen is trying to do with his money that’s most interesting, though. The satellite-TV business in the U.S. has peaked, as is pretty clear from Dish’s subscriber numbers:
Ergen readily and frequently acknowledges that the satellite business is “mature.” That leaves him with three choices:
- Milk Dish for its cash flow and give the money to shareholders -- meaning mainly him.
- Sell to somebody bigger and stronger, as rival DirectTV is doing with AT&T.
- Figure out some way to make a go of it in the fast-changing world of digital media.
By all appearances, Ergen and Dish are going with Option 3. That “by all appearances” is an important caveat, as the man has played lots of poker (as well as blackjack and backgammon) and has been known to quickly change tactics. But he’s definitely acting like he’s all in.
Dish said today that Ergen will soon be taking back the reins as president and chief executive officer -- and while it was pretty clear who was calling the shots during Joseph Clayton’s four years as CEO, this still feels significant. The company also made $13.3 billion in winning bids for wireless licenses last month, giving it total wireless holdings valued by Bloomberg Intelligence at almost $50 billion. And it just introduced SlingTV, a $20-a-month “over-the-top” Internet TV service aimed at millennials.
All this is rattling both Dish’s pay-TV rivals and the big wireless companies. It isn't that Dish is going to stomp all over anybody; it’s an also-ran with a mostly rural customer base that scares rivals precisely because it’s so scrappy and willing to take risks. As Ergen put it at an All Things D conference in 2013:
It takes a lot of guts to work at this company. We’re a little bit like an Indiana Jones movie, where we’re always in trouble and we always get out of it. We’re going from alligators to arrows to snakes.
That was in response to a question about a Bloomberg Businessweek article that called Dish “the meanest company in America.” As writer Caleb Hannan described in entertaining detail, Dish executives have to put up with long hours, no perks and a high-pressure atmosphere -- all under a driven, volatile boss who constantly second-guesses their decisions and, most maddeningly of all, is usually right. In today's earnings conference call, a couple of the analysts prefaced their questions to Ergen with a "Congratulations, Joe" to the departing Clayton. At Dish Network, making it to retirement is apparently a big accomplishment.
Ergen also has a long history of court battles with shareholders, neighbors, business rivals and even business allies. Dish’s negotiations with the networks over the right to transmit their programming usually feature blackouts and threats to walk away forever. The Hollywood Reporter, in another entertaining 2013 Ergen profile, called him “The Most Hated Man in Hollywood.” His biggest offense at the time was the introduction of the Hopper, a DVR service that allows customers to watch network shows with the ads stripped out. Fox Broadcasting sued, and that court battle is still going, although it seems close to certain that the Hopper will survive it.
With Dish’s big wireless spectrum buys, rivals such as AT&T and T-Mobile are grumbling that it (a) used sneaky means to acquire spectrum via allied companies and (b) may now just sit on the spectrum it acquired for 10 years. Ergen offered a simple response to the first complaint in the company’s earnings conference call today: “We went by the rules.” In response to the second, his answers were much more meandering, and for good reason. He hasn’t decided yet what to do with all the spectrum Dish has acquired -- and even if he had he wouldn’t tell anybody before he absolutely had to.
Ergen described this approach in a 2011 conference call with a reference to “Seinfeld,” the TV series famously conceived as a “show about nothing”:
There’s a lot of things that happen in the first about 28 minutes of that show where you don’t know exactly where that show was going. But it seemed to all come together in the last couple of minutes. So it could be a strategy about nothing, if you’re skeptical. But I think that everything we do has a purpose.
Meaning: we should probably keep paying close attention.
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