Could OTT Be Bigger Than DBS?

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That’s what DISH Network co-founder and CEO Charlie Ergen told analysts on his company’s Q3 conference call Wednesday,  as the company saw revenue inch ahead from $3.73 billion to $3.75 billion and net income jumped from $196 million (42 cents per diluted share) to $307 million (64 cents).


This missed the consensus estimate of analysts of 68 cents, while revenue beat the street by $10 million.

Asked by John Christopher Hodulik of UBS Securities LLC how large of a percentage of traditional multichannel distribution or multichannel video product could the “Over The Top” (OTT) become over time, Ergen said, “OTT in general has the potential to be as big or bigger than the DBS business, right? It’s the next way to watch live TV, right? Cable, then satellite and now, OTT, because it has some built-in advantages, right? It’s immediate. It’s just an app, so you don’t have to wait for an installer. You don’t have two-year contracts. You can watch on any device. The advertising can be more meaningful to you. It can be more directed to you. So, there’s a lot of different things you can do with it.”

Ergen added that a DVR isn’t even needed, as everything one needs can be stored in the cloud.

“There’s a lot of built-in advantages in terms of where OTT can go,” Ergen added. “That’s the positive. The danger is that the ecosystem ends up so chopped up that it’s truly an à la carte experience. The barriers-to-entry are not great, right? So pretty much anybody could enter into the marketplace. There’s a lot of technical things you’ve got to do and there’s some capital and so forth. But there’s certainly big guys, big companies that could enter the business.”

Ergen also pointed out that there is “seasonality” to OTT. “We know that the churn can be high one month and low one month,” he said. “We know that people can come in for a big event and then drop out the next month. We know that people like HBO. You can come in for Game of Thrones and then six weeks later drop out, or you can binge-view and drop out. Then you wait for the next year Game of Thrones, because that’s the only thing on HBO you watch.”

 

Meanwhile, Ergen responded to a query from Mike L. McCormack, an analyst at Jefferies LLC, about cord-cutting — and if customers are swapping DISH for Sling, its OTT offering. 

“We don’t see a lot of cord-cutting from DISH to Sling, primarily because it’s a little bit of a different product,” Ergen said. “It’s not really appealing to a guy who wants to watch a lot of stuff. It skews younger and to people who are cord-nevers or have already cut the cord somewhere else.”

DISH does see a growing trend to cord-cutting, however.

“It ranges from people totally cutting the cord and just watching network TV with a Hopper antenna to maybe adding Hulu or Netflix or Amazon or a combination of those, to people who add Sony Vue or Sling or maybe now DirecTV NOW,” Ergen said. “So, there’s a way for people to cut their bill and still get enough viewing to satisfy their need.”

DISH lost approximately 20,000 net broadband subscribers in the third quarter, bringing its broadband subscriber base to approximately 593,000.


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Adam R Jacobson is a veteran radio industry journalist and advertising industry analyst with general, multicultural and Hispanic market expertise. From 1996 to 2006 he served as an editor at Radio & Records.