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ANALYSIS

Dish's play for Sprint is about defense as much as it is offense

April 16, 2013|By Joe Flint
  • Dish Network Chairman Charlie Ergen gets inspiration from Jerry Seinfeld.
Dish Network Chairman Charlie Ergen gets inspiration from Jerry Seinfeld. (Getty Images )

Dish Network Chairman Charlie Ergen once compared his corporate strategy to an episode of "Seinfeld."

“You initially didn’t know exactly where things were going, but it seemed to all come together in the end,” he said. “This is what is happening at Dish.”

For Ergen, that means turning a satellite broadcaster into a telecommunications giant. Concerned about slow growth in the pay-TV business, Ergen has made a $25.5-billion unsolicited bid for Sprint Nextel. A merger would give Dish the ability to package Internet and phone service with its satellite offerings.

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“A transformative DISH/Sprint merger will create the only company that can offer customers a convenient, fully integrated, nationwide bundle of in- and out-of-home video, broadband and voice services,” Ergen said.

Ergen, a gambler who once made a living playing cards, isn't afraid of taking chances. In this case, though, his move is more about defense than offense.

With 14 million satellite-TV subscribers, Dish trails only Comcast Corp. and DirecTV among video providers. But growth in the industry has slowed in recent years and there are concerns about its future. Competition for customers is growing more intense and programming costs, particularly for sports, continue to skyrocket.

Furthermore, younger consumers are increasingly bypassing pay-TV in favor of Netflix and other digital platforms for their entertainment.

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“Dish faces enormous challenges,” said Susan Crawford, a communications professor at Cardozo Law School and author of “Captive Audience,” a just-released book about the state of the telecommunications industry. “It’s a gamble, but if they are going to grow, they need to diversify.”

Dish is used to doing battle with rival distributors and squaring off against programmers. If it lands Sprint, though, it will face real juggernauts in AT&T and Verizon.

"Verizon and AT&T are the monsters," Crawford said.

Dish, which already markets itself as the low-cost alternative to other pay-TV distributors, could take the same approach with Sprint.

“Right now, AT&T and Verizon can charge whatever they want and raise prices with impunity. This potentially creates a strong competitor, which may be good for consumers,” Crawford said.

For Ergen and Dish, Sprint is just one more ball in the air to juggle. It is caught up in an ugly legal fight with media giants News Corp., CBS, Comcast and Walt Disney Co. over its commercial-skipping digital video recorder known as the AutoHop. Its efforts to rebrand Blockbuster from a video store chain to an online streaming service is still a work in progress.

So yes, in that sense the "Seinfeld" analogy is correct. There are lots of different plots going on at once at Dish. But Ergen should remember there's something else about "Seinfeld" he should avoid.

It was the show about nothing.

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Follow Joe Flint on Twitter @JBFlint.

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