Transcripts For BLOOMBERG Titans At The Table 20160215

Table. Hello, i am betty liu. Welcome to titans at the table. Dish Network Founder Charlie Ergen has always been something of a fearless renegade. From being thrown out of casinos for counting cards to selling satellites out of his car trunk around colorado. Ergen led a group that started echostar in the 1980s and then started dish in the next decade, upending the traditional cable tv world. In the process, he has become one of the richest men in america, worth nearly 20 billion. Ergen stepped out of the spotlight in 2011, handing the ceo reins to joe clayton. But just four years later, the founder is back in the hot seat as television undergoes another revolution. Video, moving on to your second screen. Like the satellite tv business in its early days, ergen wants to be at the forefront of this change by creating a new, over the top product called sling tv and buying up billions of dollars worth of wireless assets. Assets that he says can be used to build a legitimate competitor to at t and verizon. When we first sat down for our interview with him at his inglewood, colorado, headquarters, i asked ergen to describe this new frontier. Charlie now we are in another transformation, and the transformation is really going about in two places. One is tv itself is transforming. People are looking for more what they want to watch and not paying for things they dont watch. They want to watch tv everywhere. Part of that is the technology of ott, over the top, allows customers to do that. The second transformation is wireless, the Wireless Industry, where the world is going to be connected, all the time. And there is only two ways to do it one way is through the wire and one way is to do it wirelessly. We started on this mission five years to say that we think we want to be part of that connectivity revolution. And we think that the best place for us to be in the marketplace, if we can, is in the wireless side. We really are a Wireless Company already. Betty so you have accumulated Something Like 60 billion in wireless assets . Charlie we have accumulated about 80 megahertz of spectrum. They vary in prices and valuations of what people think thats worth, but certainly, it certainly is worth a fair amount of money. But it is only really worth money when you put it to use and when you ultimately build a business around it and ultimately get discounted cash flows in the future. And of course that is what we are looking forward to doing. Betty charlie, does this remind you at all what you just said the transformation of television. And this you know, the onboarding of so many millions of people wirelessly. Does this remind you of the early days of Satellite Television . Charlie it does. Because in the early days of Satellite Television, everybody the incumbents said, well, why would satellite tv why would anybody pay for a satellite dish . All right . The answer was Pretty Simple it was better picture quality. It was all digital. It was interactive guide. It was less expensive. The bundles were smaller so you had a little bit more choices as a consumer. The signal quality was more reliable. It was a better picture. Hd tv was more prevelent with satellite. And so now people are asking the question, why would you pay for ott . And there are similarities. Ott eliminates some of the pain points. We have 10 million to 15 million broadband homes in the United States who dont pay for tv. All right . As we know it. They may pay for netflix or hulu, but they do not pay for tv as we know it. So we take away some of those pain points with sling tv. So you do not have a contract, you dont have equipment to buy, normally. You can go on vacation and take your service off for a month, and it is immediate. Betty you can do it right away. Charlie so you could sign up for sling tv and you are watching the nba finals tonight and you dont have to wait for an installer and somebody to come out. Betty you dont have to take a day off of work and wait for the cable guy. Charlie and it is less expensive. Our basic package is about 20. And then we have seven or eight different mini packs that you can add onto if you want to, including one premium channel in hbo service and hbo. So it attracts a lot of people, particularly younger people who are not paying for tv today. Or maybe at one time paid for tv, said it was just too expensive, and dropped off the paid tv universe. We certainly are encouraged by the start of sling tv, but we have a long way to go. We are not perfect yet. We knew it would be difficult, but it is technically difficult, because we are on lots of different devices. And live tv is really hard, because we are inventing things like dynamic ad insertion that havent been done before for live tv. It reminds me a lot of when we started satellite. We started dish Satellite Television, we had all kinds of technical problems. Every night, we just had to knock them down one by one by one. It took us about six months. We occasionally have a technical problem today. Betty but you pretty much resolve it. Obviously, you resolved it then, and you believe you will have that same timeframe. For sling. Charlie there is no question we have resolved problems and we have resolved most of them, but we had a choice to make which was either get out there and find out what we dont know, or do we wait and try to be perfect. And we got out there probably, maybe, a little ahead of our skis, but i think it will pay off for us now. And for the people who are watching who didnt have a good experience, try it again, because you will have a better experience today. Betty you have all of your cards close to your chest right now. You have got your wireless assets. You have, you know, sling tv. You are looking at various options. So when are you going to when are you going to make your play . Charlie well, i mean, i think, a, we have told people what we are going to do. We have been saying virtually the same thing for five years. So i dont think it is anything really new, in the sense that our dream would be to use our spectrum to really enhance the way people connect and provide competition in the wireless business. And not just the wireless business, but the broadband business as well. Because i do think that, if properly deployed, that a truly that we can go to a lot of homes with totally wireless connections, and they would not have a need for cable at all. For any of their needs. So that provides real meaningful competition where there is not that much competition in broadband today. So i think we can do those things. How we do those things, i think, is the way it is not that we havent played our cards. Its we dont know. So it is we do not know exactly the best way to play that. Because you have to find companies that have a likeminded strategy. You like to have companies that want to move the same direction that you want to do it. And you want them to make sure that it is economic to your shareholders to move in that direction. And we are not that big a company, so we dont you know, it is not like we can pick the phone up and make things happen. I think there are much, much bigger companies. Betty really . I think anybody would take a call from Charlie Ergen. Charlie i think people will take our call, but i think that certainly the Wireless Industry is controlled by two companies today. They are 20 times bigger than we are. So, they are going to make their moves and do their things and people are probably going to react to that. And so sometimes you just have to be ready to move when you see other things that happen in the industry. But we know the one thing we know for sure is the spectrum we have is valuable, the spectrum is going to be put to use, and it will create value for our shareholders. But we want to make sure it gets put to use in the most economical way, and providing the best competition and the best product. Betty could Charlie Ergens next play be a merger with tmobile . I will ask him if all of those reports make sense when titans at the table returns. Betty welcome back to titans at the table and my conversation with media titan Charlie Ergen. For years, ergen has been buying up gold. The wireless kind. He has bid in several auctions for wireless spectrum, which are basically the airwaves that transmit your phone calls or video to your devices. Analysts estimate ergen is sitting on almost 50 billion worth of this gold, which has led many to wonder if he is on the cusp of merging with a wireless carrier. Maybe tmobile . He wouldnt confirm the rumors, but i asked him if it would be logical for the two companies to team up. Charlie i mean, i think that there are certainly a lot of positives to that, if there are willing participants. But they certainly have done a fantastic job in kind of being the upstart company, the uncarrier, so to speak. So john ledger and his team have really captured the imagination of the public, in terms of attacking the pain points that we have in the Wireless Industry. Their network is very similar to our spectrum position. So it fits in that sense, and, of course, obviously, at their growth rate, they are going to need more spectrum. So, those things make some sense. I think there is things that dont make as much sense. They are obviously controlled by a German Company that has Strategic Initiatives both in europe and the United States, and they may not be in a position where they want to do anything. We have other options that may be more attractive, you know, to our board and our shareholders. So, you know, i think there is a number of options that are out there. Certainly, tmo is an option. Betty well, speaking about the german owner, deutsche telekom, there are reports that one of the reasons why a deal might not happen with tmobile is that they dont value dish shares as highly as you value them. There is a disconnect there. Where do you think dish should really be trading at . Charlie well, i never can predict the stock market. I would only say that, in the long run, we think our shares are undervalued. What we think with the spectrum value that we have we are probably undervalued with the spectrum position that we have, but we have to prove it to the marketplace. Betty undervalued by how much, charlie . Charlie well, i dont know. I dont know. I mean, i can only speak as a shareholder. I havent sold any shares recently. [laughter] charlie so i still have the shares from when we originally started the company. I believe in the longterm future of the company. I mean, this is our 35th year in business, and i think our best days are ahead of us. So i think it is ultimately how you can manage the company and how you can take advantage of the things that may happen in the marketplace to grow your business. And you cannot be afraid to change. And you have to have a team that can adapt to change and be willing to change, and i think we have that here at dish. Our shortterm focus, i think, is probably, you have an at t directv merger. If approved, we would want to see what the conditions we publicly have not opposed the merger, but we have said that there needs to be meaningful conditions, particularly to protect consumers for broadband rights. The incentive option is coming up, and there is a set aside for new competitors, potentially, and that is now set at 30 megahertz. And i think us and other companies would like to see that to be higher, provide competition. Because its really what stands in the way of real competition with at t and verizon is the fact they control the vast majority of the lowband spectrum, so they have better coverage. Betty top of mind, what is the number one condition you want to see for you to say ok, this merger is ok for us . Charlie well, i think that the main condition is that obviously at t controls a lot of the broadband pipes. And what people do now is they they they bundle the video and broadband pipe together, where you really cannot pick the best video choice for you as a customer if you want the broadband. In some cases, they are the only broadband provider in the territory. Or the only meaningful broadband provider. So what we want to see is to make sure that broadband is sold as a standalone item and not at a fair price to consumers. And i think the other part is that you want interconnects to the broadband pipe. You dont want the ramp to broadband you dont want that ramp to be closed. And Net Neutrality addresses some of that, but you would like to make sure that the conditions of the merger are going to survive court cases. Betty going back on your wireless assets, as i mentioned, some people estimate the value to be Something Like 50 billion or 60 billion or so. What will you do with those wireless assets . Because, you know, there are reports that for you to really be able to leverage them up, youre going to have to youre going to have to partner with a Wireless Company. But if you dont, you know, might you spin off those assets . Might you separate dish, then, into two video and wireless spectrum . Charlie i think we have talked about this on one of our conference calls. We have looked at different corporate structures. We continue to look at different corporate structures. So that you may end up with assets in different formations, and the reason you would do that is just to have flexibility for how they could get put to use and maybe the timing of when they could be put to use. So we have looked at that. We havent made any decisions on that yet. But it is certainly Something Worthy of looking at. Betty is there anyone out there that you would never partner with . Charlie no, i dont think we would ever we would never say never. I mean, i dont think so. I think i mean, the people i know in this industry i have a tremendous amount of respect for what they have all done. They have all been very successful companies. They all have their strengths and weaknesses. They all have things that are meaningful. I think the most important thing to us is ultimately what would the value be to our shareholders, and who would make the best use of who would help us make the best use of our spectrum . So we can change the way people live by this connectivity and how that does change lives. And we have done some of that on a small scale with satellite tv. You know, we were the first guys to to really do local to local and spot beam satellites. We were the first guys to really have a dvr for the american public. We obviously have fought many battles to make sure that consumers have the right to choose in how they watch their tv. So i think we have done a lot of really good things, but like i said, i hope our best days are ahead of us and that we change the way you connect. And if you change the way if you get people connected all the time, it changes every facet of your life, from health care to education to the way you live. And it is a great Digital Divide conqueror, because at all levels of the American Economy rich, poor, innercity, rural they all know how to use phones and tablets. And even little kids know how to use a tablet at two or three years old. Betty it is a great equalizer, isnt it . Charlie so it is a great equalizer. So i think we can have a positive impact on america and society, in terms of making sure that we bridge that Digital Divide, and one of the ways i think we can do that is with connectivity. Betty when we come back, what is it like to work for ergen . I ask the dish founder about his reputation as a difficult boss and how he is trying to revamp that image in his company. Charlie you dont get a medal for participation. Betty more when titans at the table returns. Betty welcome back to titans at the table. I am betty liu. It was fun to sit down with Charlie Ergen, but according to some reports, its not so much fun to work for him. In 2012 and 2013, employee surveys conducted by glassdoor gave dish network some of the lowest ratings in the country for its work environment. Ergen told me he is aware of the criticism and is trying to change some things internally, but he also defended the culture he has built at dish. Charlie i think i am a really easy guy to work for and with if you are a high achiever and you want to achieve something. If you just want a job, you are probably not going to like it too much here. Right . I mean, i think i think dish is a culture for those people who want to achieve something. And there is some uncertainty, as you know, as we are talking about what you can do with the wireless. Our shareholders dont know exactly, so there is some uncertainty, so it takes a little bit of bravery as a shareholder. You have longterm thinking. And i think even for employees, they would like to know what is going to happen tomorrow, but we dont always know what is going to happen tomorrow. So it is a special kind of it takes trust in your management, it takes a bit of an adventurous spirit to work here. Because you dont always know exactly where youre going to go. And youre not in a training program, so you have to be a bit more of a selfstarter. But for those people who like that, wow, you can start at we have people who started in the warehouse that are executives. There are people who started in call centers who are executives now. People who are achieving kind of their own internal potential, and they are passionate about what they are doing, and theyre having a lot of fun. Betty so if you were to write a management book, charlie, what would the title be . Charlie i wouldnt write a i couldnt write a book, number one, but i do think that companies that the culture of a company is important. And i think that companies dont have a good track record of surviving a founder. Right . And the ones that do have a culture that carries on. Right . Its not to say a culture would not evolve and change over time, but the culture is what carries on, not the people. So once you establish a culture, i think you have got to you have always got to hire and train into that culture. We have made some mistakes in the past where maybe we got complacent and did not do a good enough job up front in making sure people really understood what our culture was all about. But i think what people generally say they like about the culture is they can make a difference and they can make decisions and do things quickly. Whereas a lot of companies, it is a lot of data, a lot of analyzing, a lot of meetings without a lot of decisions. Here, we are moving pretty quick. You know, but the negative part of it is we do we have high expectations. And if youre not somebody used to high expectations, you are just not as comfortable here. We dont you know, its i remember when my kids would be in the relay on the track meet at school, and the person who came in first and the person who came in last, they all got medals for participating. But we dont do it that way here. [laughter] charlie you know, you dont get a medal for participation. Betty ergen went on to tell me that he thinks companies can be demanding while keeping their employees happy, but it is clear that for this ceo, winning is what ultimately counts. So our conversation turns to competition. As the paid tv market morphs, will there be a shakeout, and who will succeed . Charlie like any new technology, new business, there will be some carcasses that dont make it. They will be dead along the side of the road. We just hope were not one of them. You know, we dont mind other people being successful. We really kind of try to do it ourselves and think how we are going to be successful. And we will be successful if we have good technology, and a good product, and a good choice. Betty but is it going to be fought on price . Is it going to be primarily on price . Charlie i think it will be fought on price, but i think it will also be fought on user interface and ease of use. So can you just pick it up and use it without an instruction manual . You know, certainly, apple has kind of pioneered that kind of thing, but we have done a pretty good job of that ourselves. And we got lots of room for improvement on sling tv. Which is a pretty good user interface for 20 channels. Now were 60 channels. And over 200 international channels. So we have to make improvements there, but it will be fought on a number of issues. It will be fought on distribution, it will be fought on real estate, on devices, and is your app on devices . So a lot of issues, but price will be one of the issues. Betty so given that, i mean, is apple tv i mean, the fact they have not revamped this in several years, are they a little too late to the game here . Charlie no, i think we are still in the first inning. So i dont think they are late to the game at all. I dont think the second inning is until next year. So i think there is room for multiple entrants. And we will probably see multiple entrants, including the cable industry, at some point in time. Betty where do you see video in five years, charlie . Charlie i mean, in general, i see almost any video that you or i would want to watch is probably in the cloud. And we are probably connected to the cloud, and we have access to that video. And the next generation probably doesnt know necessarily know video by channels, they probably dont know it by comedy central, they know it by this particular show. Betty by the program. Charlie by the program. There is a loss of identity, i think, probably, that goes on between the networks, and it just becomes shows. I mean, netflix has proven that, right . You do not know you are getting programming from viacom and discovery, but you dont know its their programming. And i am a little bit i was always a little baffled why the programmers did that. But that cow is out of the barn. So you are just going to go you will just talk to your phone or to your device and say, this is what i want to watch, and it is just going to pull it up and you are going to start watching it. And youre not going to have to worry about pushing a button to record something. Youre not going to have to worry about doing anything. It is just that you are going to have access, really, on demand to every video. Betty instantly. Charlie whether it is a 1930s movie or the latest sporting event. Betty so you distribute content, but would you ever go into creating content . Charlie i doubt it. We barely have expertise to do what we are doing today as a company. [laughter] charlie and we are trying to get better, but we have no expertise on content creation. The only thing we ever the only thing we ever created in content was a charlie chat show, where i would sit here and talk to our customers like im talking to you, when i was ceo, and it was a pretty bad show. And you know, that is the best we have ever done. Betty have you reinstituted that . Charlie i havent yet. There is not, like the phone is not ringing off the hook to bring back the charlie chat. [laughter] betty that wraps up this special titans at the table conversation with dish tv founder and ceo Charlie Ergen. You can find more episodes of our show on bloomberg. Com, along with indepth coverage of todays news and conversations with the worlds business leaders. I am betty liu. Thanks for watching titans at the table. 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