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'Anticompetitive Play'

‘No Company’ Would Bow to AT&T Demands on Guaranteed Paid HBO Subs, Says Ergen

It would be “malpractice” for any company to accept AT&T’s demand that Dish Network pay for a guaranteed number of HBO subscribers regardless of how many want the channel, said Dish Chairman Charlie Ergen on a Wednesday earnings call. HBO went dark on Dish last week (see 1811010016).

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AT&T is giving HBO “away free for life,” said Ergen. “Why would a customer pay Dish when they can get it from AT&T free for life? So therefore you’re paying them for customers that you don’t have, and they’re giving it away for free, but they’re still getting paid on customers.” Ergen contended no company “would sign up to a deal like that.”

The HBO demands of AT&T are “purely an anticompetitive play that we tried to warn about” when Dish opposed AT&T’s Time Warner buy, said Ergen. “They said they weren’t going to do it at trial. They said they were never going to take HBO down. It’s never been down before. We’ve always been able to reach agreement with HBO. First time in 40 years. The only difference is, AT&T and DirecTV now own it.” Ergen said: "It doesn’t take rocket science to figure out what’s going on here.” AT&T didn’t comment.

Dish lost 367,000 net subscribers for its DBS service in Q3, compared with 220,000 lost in the quarter a year earlier. About half the subs lost in Q3 were the result of the Univision blackout that began during the summer (see 1807020030), said Dish CEO Erik Carlson.

Sling TV had 26,000 net subscriber adds for its over-the-top service vs. 236,000 in Q3 a year earlier. Ergen blamed the slowdown on intensifying competition. “I don’t think the OTT business is slowing down, I think it’s probably accelerating,” he said. “But you’re seeing a lot more players.” Ergen predicted “you’re going to see a lot more people in the category,” but “at some point, there’ll be too many and at some point, there’ll be a consolidation.”

With the category growing, competition is “tougher, and most people probably aren’t making money in the business today, based on their programming costs,” he said. “Somebody’s going to get profitable and probably lead the pack.” Ergen is confident Sling “can be a long-term player there.” He dodged a question on whether Sling was in the black. “Under Charlie Ergen’s definition of profitability,” he said, “I think I’d like to make a little more money than we’re making today.”

Dish's net profit rose 44 percent to $452.6 million, despite a 5 percent revenue decline to $3.4 billion. Dish finished Q3 with 10.3 million DBS subscribers compared with 11.2 million a year earlier, and 2.4 million Sling subscribers vs. 2.1 million. Shares closed 2 percent higher Wednesday at $32.12.