Dish's Charlie Ergen: TV Programmers Devaluing Content With Digital Deals

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At a conference call to discuss first quarter earnings today, Dish Network chairman Charlie Ergen suggested that TV programmers have "devalued" their content by striking deals with digital outlets such as iTunes, Amazon.com, and Netflix. “Programmers have devalued their programming by making it available on multiple outlets,” said Ergen. “We believe the product had been devalued because you can get it multiple ways. It is not quite the same as if it was exclusive.”

Ergen was responding to a question over Dish's decision announced Friday to soon drop channels from AMC Networks, including AMC, IFC, WE tv and Sundance from its satellite service.

STORY: Dish Reports Higher First-Quarter Sub Growth, Lower Earnings

AMC has suggested that the decision was retaliation by Dish for an unfavorable outcome at a New York appellate court in an ongoing legal battle over a 2008 decision to terminate an agreement with AMC subsidiary Voom HD. Dish has rejected that theory, saying its move was the result of taking a hard look at the data and making a business call.

For the first quarter, Dish has announced subscriber growth, adding 104,000 customers, more than Wall Street had expected.

Discussing news with analysts of the company's highest subscriber growth in two years, company executives identified a number of factors, from new marketing messages, new partnerships, and new products. But Dish executives also attributed growth in its subscriber base to keeping the cost to customers static as some of its competitors in the cable space were raising rates.

Dish now has just over 14 million subscribers and Dish CFO Robert Olson noted that the company's churn rate, or rate of cancellations, decreased to 1.35 percent compared to 1.47 percent for the same period in 2011. "Some of this was driven by not increasing prices," he says.

The executives noted that programming costs continues to rise in the industry, outpacing inflation, but that Dish was able to keep prices flat by reducing variable costs.

In the future, that could include cutting programming.

Addressing the decision to drop AMC, Ergen said, "Our customers are not saying we want to pay more money. They are saying, 'We want more flexibility and don’t want to pay more.'"

"We are facing a situation where we want to reduce programming costs and programmers are going the exact other way," said Olson.

STORY: Dish to Drop AMC Networks Amid Escalating War of Words

Ergen points to the many ways like iTunes and Amazon.com that customers can continue to get such shows as Mad Men, The Walking Dead and Breaking Bad, but says that when looking at the company's own customer base -- which he says leans more rural -- the low viewership couldn't justify the costs. He also predicts that Dish won't be the last company to make a decision like this on the heels of programmers striking digital pacts.

"All companies are taking a look at this," he says. "There won't be four providers who offer the exact same thing. There will be breakout of some companies offering something different."

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