MediaWeek, a respected advertising-oriented publication, takes a close look at Charlie Ergen in its current issue:
October 11, 2004
Twenty-four years ago, Charlie Ergen started off with two big satellite dishes and a plan. Through brilliance and sheer gumption, he's built his EchoStar Communications into a nearly $6 billion company. He's succeeded in weaning 10 million consumers off their accustomed diet of high-fee, spotty-service cable TV and onto his DishNetwork satellite service.
So why is the government balking when Ergen says he wants to expand service to yet more customers?
Last week, EchoStar lost a crucial round in Congress as the House of Representatives voted to stop the company from offering local TV channels on two dishes. Representatives also brushed aside EchoStar's call to let satellite companies serve up digital TV where broadcasters don't offer the service. Senate action is pending (see Media Wires on page 10).
Some might see the hand of the powerful TV broadcasters' lobby in Ergen's setback, and indeed the National Association of Broadcasters has lobbied hard against EchoStar all year as four congressional committees considered the satellite legislation.
Yet some observers say that, to a large degree, EchoStar's legislative predicament derives from the same source as the company's drive to the No. 2 position in the U.S. direct-broadcast satellite market—the mercurial, no-holds-barred style and practices of chairman and CEO Charles Ergen, 51.
"If one were looking for a metaphor, one would note by repute Charlie Ergen is one of the finest poker players in the sector," says Washington-based Legg Mason analyst Blair Levin. "He has been very adroit." But, Levin adds, "If you're looking at the pure regulatory stuff, you might say he's lost more battles than he's won."
And therein lies a tale, a story that includes angered judges and miffed lawmakers whose collective ire may outweigh Ergen's image as a buccaneering, bootstraps entrepreneur who stirred up an industry that had seemed bound by the eternal, dreary struggle between broadcast monoliths and cable monopolies.
Ergen's accomplishments play well among lawmakers mindful that virtually every constituent watches TV. "They value what they see. They respect the entrepreneurship. They love him sticking it to cable," notes one Washington insider. "And they can't afford to piss off the subscribers" that EchoStar has in their districts.
But they might not be willing to block for an Ergen end run around local broadcasters that dominate home district news and still rank high in overall viewing, even if most homes watch via cable and satellite. Take, for instance, this year's struggle over EchoStar's bid to offer out-of-market digital TV where customers cannot receive local stations' digital signal. The idea has a face-value appeal: Why not provide better digital service now, rather than wait for broadcasters to provide it?
The answer is that broadcasters want viewers tuning into their local stations, not to a so-called distant network station from New York or Los Angeles. They were not assured by the prospect that EchoStar would need to stop importing distant-network digital once local broadcasters powered up their digital signals. The company "has a well-documented history of abusing its rights and privileges," the NAB and The National Cable and Telecommunications Association, representing big cable companies, said in a joint letter to Congress Sept. 24.
The background includes a June 2003 finding by U.S. District Court Judge William Dimitrouleas in Miami that EchoStar during the 1990s had illegally signed up customers for analog distant-network signals. Dimitrouleas ordered the company to strike customers who prove ineligible. EchoStar's appeal is pending, and Dimitrouleas' ruling has yet to take affect. But his words echo for some.
Dimitrouleas wrote that he found no evidence EchoStar had complied with Ergen's pledge to cut off some improperly gained distant network subscribers—action that the judge said could have affected more than 258,000 subscribers. "It appears that EchoStar executives, including Mr. Ergen…when confronted with the prospect of cutting off network programming to hundreds of thousands of subscribers, elected instead to break Mr. Ergen's promise to the court," Dimitrouleas wrote.
EchoStar said the court's injunction was too broad and would result in "many consumers wrongfully being denied distant-network channels." Regardless, by early this year, its record in federal courts was drawing congressional notice. At an April 1 hearing, Rep. Steve Buyer (R-Ind.) noted the ruling in Florida and another ruling in which a judge complained of EchoStar's conduct. Speaking from the dais, Buyer admonished EchoStar senior vp and general counsel David Moskowitz. Echostar "just doesn't have a good track record in our court system," Buyer said. "So now I have to say, have you danced on the law? Have you disregarded the law?"
Moskowitz told Buyer: "Mr. Ergen did not break any promise to the courts," adding that "the judge also found that we comply with the law today."
It wasn't the company's first rebuke from a lawmaker. Two years earlier, Rep. John Dingell (D-Mich.), one of the long-serving barons of the House, complained that EchoStar was legally challenging the requirement to carry all local channels if it carries one, a legal provision to which it had assented during bargaining for the right to provide local channels. "The Congress believed in 1999 that EchoStar must bear the burden of complying with the law…rather than to litigate one half of the bargain struck," Dingell told Ergen, who was appearing as a witness. Unbowed, Ergen went on during the hearing to complain about the "burdensome" law Dingell cited.
To rivals, such comments seem a reflection of EchoStar's, and Ergen's, innate combativeness—and a lack of moderation. "They, like their leader Charlie Ergen, are scrappy, competitive," says Matthew Polka, president of the American Cable Association, which represents smaller cable operators. "Basically their company policy is, in many cases, scorched earth. They have probably made more enemies than friends. And that in time is going to work against them."
It is common wisdom in Washington that EchoStar's reputation damaged its chances for success in the company's other major legislative battle this season, the two-dish controversy. EchoStar warned that local service in some markets may be damaged if it must offer all local channels on a single dish. Some on Capitol Hill discounted that as a bluff from a company with an ambiguous track record. "That statement by Dingell back in 2001 basically explains why EchoStar is losing the two-dish battle now," says Charles Schwab analyst Paul Gallant.
Not all of Washington is critical. Some lawmakers see Ergen as bringing much-needed price competition and innovation, especially to rural areas long lacking in both. "I think the consumer interest should prevail here," says Rep. Rick Boucher (D-Va.), a leader on high-tech topics who represents southwestern Virginia. "Charlie Ergen's promoting the consumer interest." Boucher notes that critics accuse Ergen of "being undiplomatic…[but] I frankly find that refreshing. I find him to be a very welcome participant in our debates here."
Ergen will need all his savvy if he is to keep growing Englewood, Colo.-based EchoStar in the face of an energized, well-funded competitor in DirecTV. The satellite leader, with 13 million customers, is emerging from years of uncertainty as its previous owner, General Motors, concentrated more upon unloading it than upon building it up. The period included a failed bid by Ergen to buy his larger rival—a gambit that some even today call masterful, since the 12-month betrothal, ended by federal regulators in November 2002, let Ergen peer into DirecTV's books, while delaying its sale and emergence as a high-powered rival.
Now, under control of the next bidder, Rupert Murdoch's deep-pocketed and innovative News Corp., DirecTV is busily attracting customers. It said it pulled in 1.65 million new customers over the 12 months ending in June, its largest net growth for subscribers in any 12-month period. Over the same period EchoStar attracted 1.325 million new customers, according to its investors' filings. That's 225,000 less than DirecTV. And the momentum may not be going Echostar's way—nearly all of DirecTV's gain vis-à-vis its rival came in the first half of this year.
The challenge for EchoStar will only increase. On Sept. 8, DirecTV announced plans to launch four new satellites by 2007 that will allow it to offer 150 national channels in high-definition and 1,500 local channels in HD. Its current offerings include 18 national HD channels and four local channels in HD, a format expected to grow in appeal as consumers become more familiar with its clear pictures. EchoStar offers nine HD channels. On Oct. 1, it received regulatory approval to launch three new satellites that could help it offer more local and HD programming. Still, analysts foresee a competitive gulf. "DirecTV is going to have more capacity to provide high-definition channels than EchoStar, giving them an advantage with customers," notes Thomas Eagan, a senior analyst at Oppenheimer & Co.
Faced with that kind of onslaught, what's a Colorado-based, former Frito-Lay financial analyst, up-from-Tennessee, risk-taking media mogul to do?
Well, one thing Ergen won't do is talk to the press about his plans. "He has not sat down for a one-on-one interview and has no intention to do so," says EchoStar representative Steve Caulk.
Analysts say EchoStar, like DirecTV, plans to continue taking customers from cable, the enormous adversary with some 70 million subscribers—enough for each satellite company to envision a steady supply of new subscribers drawn from disgruntled ex-cable customers for years to come.
EchoStar sees itself as the low-price, high-service provider. Customers can pay as little as $29.99 a month. The company touts its best-in-industry customer service award from the authoritative J.D. Power & Co. market research firm (it need be noted that DirecTV ranks nearly as high).
History suggests that competitors can expect more unexpected tactics, especially if EchoStar feels pressed—or simply wants to be pugnacious. The company raised hackles with a "Stop Feeding the Pig" ad campaign that concentrated on rising cable rates. Rhetoric can even scorch business partners. A dispute in 2002 found EchoStar putting out press releases mentioning Disney's "flawed plan to beat EchoStar into submission." And earlier this year, during a carriage dispute that kept Viacom channels off DishNetwork for two days, Ergen accused Viacom of "holding the public airwaves hostage." During the carriage spat, callers to EchoStar were greeted with a recording that divulged Viacom president Mel Karmazin's home telephone number. Caulk, the spokesman, insists that the disclosure was inadvertent.
The tactics amuse and startle, and few in the industry doubt they come with the approval of the top guy.
"He's funny. He's brilliant. He's interesting," says one broadcast executive who has worked with Ergen. "But he does only have one speed, and it's full forward."
October 11, 2004
Twenty-four years ago, Charlie Ergen started off with two big satellite dishes and a plan. Through brilliance and sheer gumption, he's built his EchoStar Communications into a nearly $6 billion company. He's succeeded in weaning 10 million consumers off their accustomed diet of high-fee, spotty-service cable TV and onto his DishNetwork satellite service.
So why is the government balking when Ergen says he wants to expand service to yet more customers?
Last week, EchoStar lost a crucial round in Congress as the House of Representatives voted to stop the company from offering local TV channels on two dishes. Representatives also brushed aside EchoStar's call to let satellite companies serve up digital TV where broadcasters don't offer the service. Senate action is pending (see Media Wires on page 10).
Some might see the hand of the powerful TV broadcasters' lobby in Ergen's setback, and indeed the National Association of Broadcasters has lobbied hard against EchoStar all year as four congressional committees considered the satellite legislation.
Yet some observers say that, to a large degree, EchoStar's legislative predicament derives from the same source as the company's drive to the No. 2 position in the U.S. direct-broadcast satellite market—the mercurial, no-holds-barred style and practices of chairman and CEO Charles Ergen, 51.
"If one were looking for a metaphor, one would note by repute Charlie Ergen is one of the finest poker players in the sector," says Washington-based Legg Mason analyst Blair Levin. "He has been very adroit." But, Levin adds, "If you're looking at the pure regulatory stuff, you might say he's lost more battles than he's won."
And therein lies a tale, a story that includes angered judges and miffed lawmakers whose collective ire may outweigh Ergen's image as a buccaneering, bootstraps entrepreneur who stirred up an industry that had seemed bound by the eternal, dreary struggle between broadcast monoliths and cable monopolies.
Ergen's accomplishments play well among lawmakers mindful that virtually every constituent watches TV. "They value what they see. They respect the entrepreneurship. They love him sticking it to cable," notes one Washington insider. "And they can't afford to piss off the subscribers" that EchoStar has in their districts.
But they might not be willing to block for an Ergen end run around local broadcasters that dominate home district news and still rank high in overall viewing, even if most homes watch via cable and satellite. Take, for instance, this year's struggle over EchoStar's bid to offer out-of-market digital TV where customers cannot receive local stations' digital signal. The idea has a face-value appeal: Why not provide better digital service now, rather than wait for broadcasters to provide it?
The answer is that broadcasters want viewers tuning into their local stations, not to a so-called distant network station from New York or Los Angeles. They were not assured by the prospect that EchoStar would need to stop importing distant-network digital once local broadcasters powered up their digital signals. The company "has a well-documented history of abusing its rights and privileges," the NAB and The National Cable and Telecommunications Association, representing big cable companies, said in a joint letter to Congress Sept. 24.
The background includes a June 2003 finding by U.S. District Court Judge William Dimitrouleas in Miami that EchoStar during the 1990s had illegally signed up customers for analog distant-network signals. Dimitrouleas ordered the company to strike customers who prove ineligible. EchoStar's appeal is pending, and Dimitrouleas' ruling has yet to take affect. But his words echo for some.
Dimitrouleas wrote that he found no evidence EchoStar had complied with Ergen's pledge to cut off some improperly gained distant network subscribers—action that the judge said could have affected more than 258,000 subscribers. "It appears that EchoStar executives, including Mr. Ergen…when confronted with the prospect of cutting off network programming to hundreds of thousands of subscribers, elected instead to break Mr. Ergen's promise to the court," Dimitrouleas wrote.
EchoStar said the court's injunction was too broad and would result in "many consumers wrongfully being denied distant-network channels." Regardless, by early this year, its record in federal courts was drawing congressional notice. At an April 1 hearing, Rep. Steve Buyer (R-Ind.) noted the ruling in Florida and another ruling in which a judge complained of EchoStar's conduct. Speaking from the dais, Buyer admonished EchoStar senior vp and general counsel David Moskowitz. Echostar "just doesn't have a good track record in our court system," Buyer said. "So now I have to say, have you danced on the law? Have you disregarded the law?"
Moskowitz told Buyer: "Mr. Ergen did not break any promise to the courts," adding that "the judge also found that we comply with the law today."
It wasn't the company's first rebuke from a lawmaker. Two years earlier, Rep. John Dingell (D-Mich.), one of the long-serving barons of the House, complained that EchoStar was legally challenging the requirement to carry all local channels if it carries one, a legal provision to which it had assented during bargaining for the right to provide local channels. "The Congress believed in 1999 that EchoStar must bear the burden of complying with the law…rather than to litigate one half of the bargain struck," Dingell told Ergen, who was appearing as a witness. Unbowed, Ergen went on during the hearing to complain about the "burdensome" law Dingell cited.
To rivals, such comments seem a reflection of EchoStar's, and Ergen's, innate combativeness—and a lack of moderation. "They, like their leader Charlie Ergen, are scrappy, competitive," says Matthew Polka, president of the American Cable Association, which represents smaller cable operators. "Basically their company policy is, in many cases, scorched earth. They have probably made more enemies than friends. And that in time is going to work against them."
It is common wisdom in Washington that EchoStar's reputation damaged its chances for success in the company's other major legislative battle this season, the two-dish controversy. EchoStar warned that local service in some markets may be damaged if it must offer all local channels on a single dish. Some on Capitol Hill discounted that as a bluff from a company with an ambiguous track record. "That statement by Dingell back in 2001 basically explains why EchoStar is losing the two-dish battle now," says Charles Schwab analyst Paul Gallant.
Not all of Washington is critical. Some lawmakers see Ergen as bringing much-needed price competition and innovation, especially to rural areas long lacking in both. "I think the consumer interest should prevail here," says Rep. Rick Boucher (D-Va.), a leader on high-tech topics who represents southwestern Virginia. "Charlie Ergen's promoting the consumer interest." Boucher notes that critics accuse Ergen of "being undiplomatic…[but] I frankly find that refreshing. I find him to be a very welcome participant in our debates here."
Ergen will need all his savvy if he is to keep growing Englewood, Colo.-based EchoStar in the face of an energized, well-funded competitor in DirecTV. The satellite leader, with 13 million customers, is emerging from years of uncertainty as its previous owner, General Motors, concentrated more upon unloading it than upon building it up. The period included a failed bid by Ergen to buy his larger rival—a gambit that some even today call masterful, since the 12-month betrothal, ended by federal regulators in November 2002, let Ergen peer into DirecTV's books, while delaying its sale and emergence as a high-powered rival.
Now, under control of the next bidder, Rupert Murdoch's deep-pocketed and innovative News Corp., DirecTV is busily attracting customers. It said it pulled in 1.65 million new customers over the 12 months ending in June, its largest net growth for subscribers in any 12-month period. Over the same period EchoStar attracted 1.325 million new customers, according to its investors' filings. That's 225,000 less than DirecTV. And the momentum may not be going Echostar's way—nearly all of DirecTV's gain vis-à-vis its rival came in the first half of this year.
The challenge for EchoStar will only increase. On Sept. 8, DirecTV announced plans to launch four new satellites by 2007 that will allow it to offer 150 national channels in high-definition and 1,500 local channels in HD. Its current offerings include 18 national HD channels and four local channels in HD, a format expected to grow in appeal as consumers become more familiar with its clear pictures. EchoStar offers nine HD channels. On Oct. 1, it received regulatory approval to launch three new satellites that could help it offer more local and HD programming. Still, analysts foresee a competitive gulf. "DirecTV is going to have more capacity to provide high-definition channels than EchoStar, giving them an advantage with customers," notes Thomas Eagan, a senior analyst at Oppenheimer & Co.
Faced with that kind of onslaught, what's a Colorado-based, former Frito-Lay financial analyst, up-from-Tennessee, risk-taking media mogul to do?
Well, one thing Ergen won't do is talk to the press about his plans. "He has not sat down for a one-on-one interview and has no intention to do so," says EchoStar representative Steve Caulk.
Analysts say EchoStar, like DirecTV, plans to continue taking customers from cable, the enormous adversary with some 70 million subscribers—enough for each satellite company to envision a steady supply of new subscribers drawn from disgruntled ex-cable customers for years to come.
EchoStar sees itself as the low-price, high-service provider. Customers can pay as little as $29.99 a month. The company touts its best-in-industry customer service award from the authoritative J.D. Power & Co. market research firm (it need be noted that DirecTV ranks nearly as high).
History suggests that competitors can expect more unexpected tactics, especially if EchoStar feels pressed—or simply wants to be pugnacious. The company raised hackles with a "Stop Feeding the Pig" ad campaign that concentrated on rising cable rates. Rhetoric can even scorch business partners. A dispute in 2002 found EchoStar putting out press releases mentioning Disney's "flawed plan to beat EchoStar into submission." And earlier this year, during a carriage dispute that kept Viacom channels off DishNetwork for two days, Ergen accused Viacom of "holding the public airwaves hostage." During the carriage spat, callers to EchoStar were greeted with a recording that divulged Viacom president Mel Karmazin's home telephone number. Caulk, the spokesman, insists that the disclosure was inadvertent.
The tactics amuse and startle, and few in the industry doubt they come with the approval of the top guy.
"He's funny. He's brilliant. He's interesting," says one broadcast executive who has worked with Ergen. "But he does only have one speed, and it's full forward."
