Dish CEO: Online TV Becoming Competitive to Netflix

9 Nov, 2015 By: Erik Gruenwedel

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Rollout of over-the-top TV services such as Sling TV, PlayStation Vue and Charter Spectrum TV have created legitimate competition to subscription streaming services such as Netflix, Amazon Prime Instant Video and Hulu Plus, said Dish Network CEO Charlie Ergen.

Speaking Nov. 9 on the company's fiscal call, Ergen said ongoing improvements to technical issues (i.e. buffering) and on-demand functionality should make online TV a more-compelling product offering to consumers and content holders going forward.

“We give people the ability to binge-view on all of their devices with less advertising load [but with] more meaningful [targeted] commercials,” he said. “It ends up a way for content providers to put the [OTT video] genie back in the bottle from a value proposition.”

That said, Ergen acknowledged that technical issues continue to undermine Sling — some of which involved outages and blank screens during high-profile sporting events (NCAA March Madness) and program debuts (“Fear of the Walking Dead”), prompting the service to issue apologies on social media.

“We’re not perfect yet. One of the big obstacles is to perform technically to the level that we can on linear TV. We’re not quite there yet,” said the CEO.

At the same time, broadcast content holders appear to be warming up to online TV, with Disney the most open-minded, according to Ergen. Disney has made ESPN, ABC TV and Disney Channel available for Sling, Spectrum TV and Time Warner Cable’s beta-testing TWC TV.

“I think there’s renewed interest in [OTT among pay-TV operators],” he said. “Linear TV is still a mature-to-declining business.”

Ergen said last quarter’s “market overreaction” to pay-TV sub losses have given way to market conditions he feels are more representative of ongoing pressures on linear TV, which include loss-leader skinny bundles that enable pay-TV operators to keep subscribers but at much lower ARPU (average-revenue-per-unit).

“The lifecycle of a [pay-TV] customer today is less than it was three years ago or four years ago or five years ago. So when you put all that together, we just take an approach [with Sling TV] that we think is more economical … and offers alternatives.”

He said Sling TV provides an attractive alternative to content providers to lure incremental subscribers and get involved in an advertising model that's more lucrative than linear TV. Pay-TV operators attempting to retain subs with loss-leader channel bundles are ignoring the associated real costs, says Ergen.

“I think they ultimately will probably move away from some of the heavy discounting for content, because mathematically or economically that's the only logical place you can go, once everybody gets over the sub counts delivered to the street every quarter.”

Ergen said that he’d rather have fewer profitable subscribers than exaggerated sub counts that lose money.

“For us, it's all about economics and what kind of return we're getting. And sometimes the best return you get is to let a [pay-TV] customer go.”

 

 

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