Dish's Ergen: People Are Cutting the Cord

Head of third largest pay TV operator argues ad and pay TV models have to change

By George Winslow -- Broadcasting & Cable, 2/12/2013 7:28:01 PM

During an hour-long interview at All Things D's "D: Dive into Media" conference, Dish chairman Charlie Ergen argued that consumers are in fact cutting the cord, threatening the foundations of the pay TV business, and that whole television industry needed to embrace major changes in their business models.

'Advertising is great'

At the start of Ergen's interview, the organizers played a new Dish Network ad for its Hopper with Sling HD DVR that allows consumers to automatically skip prime time broadcast network shows. The feature has prompted lawsuits by broadcasters against Dish.

The new ad featured a mock memorial service for advertising, which the spot noted had been killed off by Dish. But Ergen responded by saying "I don't want to kill advertising. I think advertising is great."

He added, however, that "I don't want to put my head in the sand. The world is changing" and that consumer don't want "ads that aren't relevant."

With the Hopper, Ergen argued that they had the ability to insert targeted ads to different demographic groups and that he would much prefer working with broadcasters to offer targeted ads.

Ergen also denied that they had simply instituted the feature to give them leverage in retransmission consent agreements. "It is not about leverage," he noted. "It's really about technological change," adding that they were competing with online companies that could offer more relevant targeted ads.

Cord Cutting Is Happening

Ergen also had strong words for the pay TV industry. "People are cutting the cord," he noted, despite the fact that pay TV subscription levels continue to show slight increases.

"If that trend is happening, we have to get in front of that."
One key factor driving cord cutting he believes is the rising costs of programming. "I don't think you can get $100 a month from everyone," he noted, adding that only Dish and Cablevision have been proponents of a la carte pricing.

Dish Is Serious About Wireless

The need for new business models is one reason why Dish is so interested in wireless and is serious about its bid for Clearwire. It isn't an "illusory" bid, he noted.

That spectrum would make it easier for Dish to offer video "inside and outside the home," Ergen noted.

Isn't Technically Possible To Skip All Cable Net Ads

In response to a question why Dish was skipping broadcast network ads but not cable ads, Ergen said it was a technical issue.

Dish has put all the broadcast content on one satellite transponder. It had the capability of recording that whole stream onto the Hopper but could not do all the other channels. "It is a technical limitation," he said.