Dish Network's Ergen: OTT will 'chop up' the pay-TV ecosystem

Charlie Ergen, CEO of Dish Network

Summarizing the pros and cons for OTT distribution, Dish Network Chairman and CEO Charlie Ergen said there is a danger that the pay-TV ecosystem could be “chopped up” into a paradigm that is “truly an à la carte experience.”

“The barriers to entry are not great, so pretty much anybody could enter into the marketplace,” Ergen said Wednesday during Dish’s third-quarter earnings call with investment analysts and media. “So, 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."

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Notable, Ergen said, are the declining costs of bandwidth and CDNs, which further remove barriers to entry. 

“Four years or five years ago, [CDN costs] would have been a material cost in the operation of a business like Sling TV,” he said. “Today, it's not immaterial, but it is not a cost that we worry about because those costs have continued to come down so significantly. Because of the volume that we stream -- because our customers watch a lot of television -- I think we get quite good pricing on CDN.”

With a large number of operators in the market, and switching between services easy for consumers, churn will be very high, Ergen predicted. 

“It's pretty easy to switch providers, right? You just push a button,” he said. “So it's not like you've got to wait for an installer and learn a new operating system and lose all your DVR functionality. So I've always been concerned that the content creators are going to end up in a place that's maybe not so good for them. But it should be good for consumers. So the business will definitely grow.

“We know there's seasonality to it,” Ergen added. “We know that the churn can be high one month and low one month. 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. And then you wait for the next year's Game of Thrones, because that's the only thing on HBO you watch, right?