Success at Charlie Ergen’s EchoStar Communications comes not from necessarily inventing new technology but from using it for the company’s advantage.
“It hasn’t had many actual technology innovations,” says Stephen Blum, president of Tellus Venture Associates, a business-development company for the satellite and broadband business, “but EchoStar’s skill has been to identify existing technology and apply it to the marketplace.”
For years, EchoStar Chairman/CEO Ergen seemed like an outsider trying to compete and do business with the big guys. But look closer. With 13.1 million subscribers, Dish is the fourth-largest distributor of video programming—behind Comcast, DirecTV and Time Warner.
In the early 1990s, when Ergen was just starting up his satellite business, he decided to leap on to the DVB (direct-video-broadcast) technology standard that was used for digital-TV transmission by many satellite-TV distributors around the world—but not, at the time, in the U.S. by such retailers as DirecTV and PrimeStar.
As a result, “Ergen got huge economies of scale,” says Blum, a former U.S. Satellite Broadcasting executive. “One of the smartest moves he made was going to the DVB standard.”
Ergen’s rags-to-riches story would be melodramatic fare on any of the cable networks that Dish satellite services carry. His savvy use of technology is why he a recipient of a B&C Technology Leadership Award.
“I met him when he was literally trying to sell C-band satellite dishes out of back of his truck,” says Bill Tillson, president of Broadcast Cable Services, a media consultant who works with companies ranging from Walt Disney Co. to the Game Show Network.
C-band satellite systems, the precursor of the current DBS system, came with hefty multi-thousand–dollar price tags. Ergen, 54, knew that consumers would ultimately resist that idea. So he pursued DBS technology, with those smaller, less costly dishes that fit so neatly on an apartment balcony or hang inconspicuously off the side of a home.
But cost saving wasn’t only with the satellite dish itself. For instance, instead of having a plain-vanilla Motorola or Scientific-Atlanta set top box, Ergen manufactured his own. “He was able to put in many more features into those boxes,” says Tillson.
Later on, EchoStar did achieve some firsts: offering a satellite receiver for less than $200, offering a satellite receiver with built-in digital video recording.
He came close in 1997 to doing a deal with Rupert Murdoch’s News Corp., which was desperately looking to get into the DBS business. The deal unraveled, and Ergen walked away with a suitcase full of cash following litigation with Murdoch.
As a result of the final arrangement, EchoStar ended up with increased satellite capacity.
Later, in 2002, EchoStar missed out on a deal to buy and merge with DirecTV because the federal government viewed it as anti-competitive for the hot, growing business of satellite TV.
Ergen’s business mindset comes from an unusual background as poker/blackjack player and a financial analyst, one who once worked at Frito-Lay. It is a lethal combination for businesses that compete with him.
“When you own the company, you can say this is what I think our business should be,” says Blum. “It gives him incredible negotiating power.”
Tillson concurs; “This guy has been able to stand up to the Murdochs of the world. This is not easy to do.”
EchoStar’s technological innovations continue. It recently put together an advertising-auction deal with Google, constructed to sell TV-network ad time on EchoStar’s 125-channel service. The effort will also yield a new TV-measurement system that will give Google and advertiseres second-by-second viewing data on EchoStar subscribers.
Media observers also note that, compared with DirecTV and other cable operators, Ergen has been out in front in terms of interactive TV.
“Dish is the biggest story not told from a technology point of view,” says Tim Hanlon, senior VP of content at Denuo, a unit of Publicis Groupe. For instance, he adds, Dish was first with a service allowing consumers to transfer DVR video to portable devices, as well as the first to sell HD TV sets along with HD service.
“Ergen has done all this from scratch,” says Tillson. “He has dodged some phenomenal bullets.”
Says Blum, “The biggest one thing where people go wrong with him is not believing what he says.”
