From blackjack player to billionaire: Charlie Ergen

Blackjack Million Charlie Ergen

Heute stellen wir einen der reichsten Männer Amerikas vor: Charlie Ergen. Der Milliardär wäre nicht da, wo er heute ist, wenn er nicht schon früh mit Erfolg beim Blackjack sein Vermögen vermehren hätte können.

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In 1980, a few months before Charlie Ergen founded the company that is now known as Dish Network he went into a gambling joint with a gambling buddy... Casino at Lake Tahoe in Northern Nevada. He was going to make a fortune there with the count cards machen. Ergen war damals 27 hatte sich das Buch „Playing Blackjack as a Business“ gekauft und lernte fleißig die Strategien darin. Unglücklicherweise erwischte ihn ein Casino-Wachmann beim Kartenzählen und die beiden wurden aus dem Casino geworfen und erhielten für immer Hausverbot.

More than three decades later, Ergen, now 60, is again facing charges of defrauding the house - but this time the house is here, nestled in the confines of executive suites from Burbank to Beverly Boulevard. And now Ergen's Englewood, Co.-based Dish Network, the nation's third-largest satellite/cable TV provider, a publicly traded company that has grown from a $60,000 startup to an empire with 14 million subscribers and $14 billion in annual revenue, is the entertainment industry's No. 1 enemy.

With increasing frequency, Ergen has engaged in ugly, high-risk games with Hollywood. In his brutal battle with AMC over excessive broadcast fees, he dropped The Walking Dead and Mad Men from the Dish system for months. He also spent years arguing with broadcasters over the practice of remotely transmitting TV signals without a license, and was even caught breaking a promise he made under oath to stop doing so - all while Dish was being called "America's worst company to work for" by a watchdog website. But all that was just the preamble to the hopper.

In January 2012, Dish introduced its proprietary DVR service, which allows consumers to "AutoHop," that is, watch all of the networks' primetime programming ad-free without having to fast-forward through commercials. Immediately after the service launched, CBS, NBC, ABC and Fox filed a lawsuit arguing that Dish would put them out of business if they were allowed to continue offering the hopper. The networks want a judge to issue a preliminary injunction, and Fox is appealing the denial of a shutdown while it makes another attempt to ban the Hopper - after Dish added mobile features amid the legal challenge.

Ergen, who is married with five children and whose personal fortune has swelled to an estimated $10.6 billion, putting him at No. 100 on Forbes' current list of richest people, expresses confidence that he can win the lawsuit win will and says it's time for TV stations to get on board. "Some people are averse to change, but the advertising model is going to change with or without the hopper," he recently told analysts. "What we're saying to broadcasters is, 'There's a way for you guys to not bury your heads in the sand.' "

Broadcasters reject that assessment. "Services [like Hopper] that undermine the economic fabric of our business are not only illegal, they potentially destroy our ability to give audiences what they want," CBS chairman and CEO Leslie Moonves tells THR. Adds Ted Harbert, chairman of NBC Broadcasting, "I think this is an attack on our ecosystem."

Not surprisingly, Hopper has become extremely popular. The year before Dish started offering the service for free, the company lost 166,000 subscribers. Since then, Dish has gained 89,000 back.

"We're a bit like an Indiana Jones movie," a sanguine Ergen said of his company at the All Things Digital conference on Feb. 11. "We're always in trouble. We always get out of it. We always go from alligators to guys with arrows to snakes. We want to win." (Ergen declined to comment for this article.)

In einer Zeit, in der die Einschaltquoten der Big Four Networks historische Tiefststände erreicht haben – Fox ist in dieser Saison um 21 Prozent gesunken und NBC wurde im Februar in der 18-zu-49-Demo von Univision geschlagen – ist es schwer genug, Werbetreibende zu überzeugen, dass sie die Zuschauer zu den Anzeigen bringen – wie es die Sender im Mai bei den jährlichen 10-Milliarden-Dollar-Präsentationen tun werden. Es ist sogar noch schwieriger, wenn ein großer Satellitenbetreiber seine Fähigkeit anpreist, Werbespots komplett aus dem Zuschauererlebnis zu eliminieren. Die Fernsehsender hoffen, dass sie die Werbekunden bei der Stange halten können, wenn Marktforschungsinstitute wie Nielsen anfangen, den Schwerpunkt auf die Zuschauer zu legen, die das Programm eine Woche nach der ersten Live-Übertragung sehen. Aber der Analyst Richard Greenfield fragt: „C3 vs. C7? Wer veräppelt hier wen, wenn es um das Ansehen von Werbespots bei DVR-Programmen geht?“

Interestingly, TV providers like Time Warner Cable and DirecTV, while presumably in possession of the same technological capabilities, have not offered products that have triggered such industry retaliation. Perhaps there is a reason for this.

Ergen has presented the Hopper as a consumer right while also telling analysts that programmers have "devalued" content by making TV shows available on Netflix and suing ESPN, among others, for allowing streaming. CBS is trying to undo its licensing deal with Dish, claiming Ergen and his top lieutenants fraudulently concealed their plans for the hopper in contract talks in 2011. And in February, Dish alleged that CBS forced "The Big Bang Theory" actress Kaley Cuoco to delete a sponsored tweet in which she endorsed the hopper, though there was no evidence that the actress was pressured. At an event honoring Moonves in March, Cuoco proclaimed, "I want to take this opportunity to say one thing, Leslie, f- the Dish Network."

As Hollywood reluctantly enters the digital age, new players like Barry Diller's Aereo TV service are challenging traditional revenue streams and taking the networks to court. (Diller's Aereo survived an initial legal challenge on April 1, when an appeals court allowed it to stay in business at least until a trial.) Even among these threats, however, Dish represents perhaps the most aggressive and well-funded disruptor. And he's controlled by a man who has the money and the inclination to take the fight to its legal and, for Hollywood, very scary end. Yes, he's known by some within his organization for being a tight-fisted loudmouth ("They treat their employees like slaves," says one online employee review). But it's one thing to yell at subordinates and install a scanning device to control tardiness (yes, he really did that); it's quite another to destroy evidence and mislead judges in a courtroom - Dish was punished for such behavior.

All of which is enough to ask:

If Charlie Ergen is the most hated man in Hollywood, what should the industry do about him?

Ergen is now gearing up for a fight that could answer that question. A licensing agreement between Dish and The Walt Disney Co. expires in September. The upcoming talks between the companies are the first major negotiation since the Hopper's launch. Disney probably doesn't want to rubber stamp a tech product like the Hopper by renewing its contract with Dish. But it's nearly impossible for a media company to forgo the billions of dollars Ergen is paying for programming.

This friend-foe dilemma is the essential conundrum that is Dish. Six months before its contract with Disney was set to expire, Dish was not at the negotiating table but in the courtroom, suing Disney's ESPN unit for allegedly offering better rates to Dish's competition.

Naturally, Ergen has been hailed as a hero by consumer advocates who appreciate his willingness to play with a TV model that has become sacred to Hollywood conglomerates. "When it comes to trying new things and keeping costs down in a competitive market, you need a trailblazer like Dish," says John Bergmayer of Public Knowledge, a nonprofit rights organization.

Vijay Jayant, an analyst who has been watching Dish for years at ISI Group, notes, "Charlie's attitude is, 'At some point, they will negotiate with me on my terms.' He keeps bluffing until he doesn't."

If Dish displays a particular form of aggression, observers attribute it to the billionaire founder and his company's precarious position in the competitive video distribution industry.

Charlie Ergen was born in Tennessee, the son of a physicist who is said to have coined the term "China Syndrome" to describe the inadequacies of containing a nuclear reactor accident. After playing small forward on the state university basketball team, he earned a degree in business administration from Wake Forest University in 1976 and then worked as a financial analyst at Frito-Lay. Two years later, at age 25, he surprised his family by "retiring" - or rather, taking advantage of the discounts his future wife, Cantey McAdam, received from her job as a flight attendant to travel the world. He also toyed with the idea of becoming a professional poker and blackjack player.

Then, in 1980, his buddy Jim DeFranco told him about "a big satellite dish that picks up signals from space," according to a 2012 Wake Forest commencement speech. Along with DeFranco and McAdam, the three put $60,000 of their personal savings into a startup called EchoStar in suburban Denver.

An avid mountaineer who has climbed Kilimanjaro and Mount Everest, Ergen has steadily built his company - now officially called DISH - into one of the 200 largest in the world, with average annual profits of about $1 billion (Ergen controls 88 percent of the voting rights in the company). Dish thrived in large part by focusing on the hilly rural areas of the country where no cable TV lines ran - and, of course, by being willing to take on anyone who got in the way.

Dish employees, opponents and analysts say no one exploits the judicial system like Ergen to gain a competitive advantage. A decade ago, a judge found that Ergen had violated a promise, made under penalty of perjury, to stop remotely transmitting local television signals. An appeals court wrote in 2006 that there was "no indication that EchoStar was ever interested in complying with the [Satellite Home Viewer] Act," adding, "We appear to have discerned a 'pattern' and 'practice' of violating the Act in every conceivable way."

In the mid-2000s, when Ergen was battling TiVo over who owned the rights to DVR technology, TiVo not only convinced a court that Dish had infringed a patent, but the judge in that case found it "distasteful" that Ergen's company "ran an advertising campaign touting its DVRs as 'better than TiVo' while continuing to infringe TiVo's patent." In 2009, Dish was officially sanctioned by the court. (The parties later settled).

Perhaps most notorious were the angry judges who pursued Dish's recent dispute with Cablevision/AMC after Dish terminated a 15-year contract to carry the Voom networks, a series of 21 little-watched HD channels like Kung Fu HD and Film Fest HD. In the early days of the trial, Dish was chastised for "bad faith" or "gross negligence" in destroying internal company emails. A visibly angry New York Supreme Court Justice Richard Lowe later threatened to launch an investigation if Dish's documents were not released. The lawsuit got so ugly that Dish manager Carolyn Crawford punched opposing counsel's father on her way out of the courtroom. She later apologized in open court.

In a 2005 sexual harassment case in Maryland, a judge wrote that "EchoStar is guilty of gross destruction of evidence." In a 2012 trademark dispute, a judge said of Dish's lawyers that in his 17 years on the bench, he had never witnessed "such discord or contentiousness."

"Most companies have an institutional bias against litigation and see it as a necessary evil," says a network insider. "But for Charlie, it's the way he runs his company. You'll never see him sue in his home state, though. Their name is dirt in Colorado. Judges are on their heels."

In fact, when Dish filed a lawsuit in May 2012 in an attempt to beat the networks to court and get a judge to declare the hopper legal, it did so in New York.

Dish continues to be combative at every turn. The Federal Trade Commission and the Department of Justice are jointly pursuing a lawsuit against the company for allegedly violating the Rules of telemarketing by making unsolicited calls to millions of consumers. Dish also takes every opportunity to tout its Hopper as the tech product so great that broadcasters don't want anyone to hear about it (even as they tell judges that the Hopper isn't that different from other DVRs).

Ambush spin is common at Dish. On industry news websites, employees regularly leave comments aimed at secretly promoting Dish services. One writer for AllThingsD was so annoyed that in 2011 he penned a column titled "Dear Dish Network: Your Spam Makes Me Sad. Please Stop." The press release Dish issued on the Kaley Cuoco affair is another example. There was no source for CBS' alleged request to delete her tweet, and CBS flatly denied it. When asked to confirm such a claim, Dish spokesman John Hall says only, "We were contacted by someone close to the situation who told us CBS asked them to delete the tweet."

Barbara Roehrig arbeitete Mitte der 90er Jahre bei EchoStar und war die erste weibliche Führungskraft des Unternehmens. Sie erinnert sich an ständige Auseinandersetzungen mit Ergen, der manchmal damit drohte, in einen Raum zu gehen und alle Mitarbeiter zu feuern, die er als „verrücktes Pack“ bezeichnete. „Der Modus Operandi ist dort das Schreien, und das fordert seinen Tribut“, sagt Roehrig und fügt hinzu, dass sie immer noch mit vielen im mittleren Management von Dish in Contact steht, die sich weigern, in die Führungsetagen des Unternehmens aufzusteigen, weil das emotionalen Aufruhr mit sich bringt. „Wir waren alle in der Schusslinie von Charlies Tiraden.“

Dish has been called "America's worst company to work for" by the website 24/7 Wall Street, based on scathing reviews on the jobs website Glassdoor.com. Employees have been subjected to "badge reports" in which they are given a red mark for being late for minutes at a time. When traveling, employees are asked to take red-eye flights, share hotel rooms and reimburse the company if they tip more than 15 percent. One sales rep tells THR, "In my office, you're not even allowed to go to the bathroom in the morning before you go on your route, or in the evening until you get off work." (A Dish rep says the company abandoned its badge reports in January and denies that employees are forced to take red-eye flights and aren't allowed to take bathroom breaks).

 

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After Dish faced bad press, management tried to intervene. Dish CEO Joe Clayton sent employees an email that said, among other things, "If you're happy here at DISH and think the company is moving in the right direction, log on to Glassdoor.com and give your feedback."

At Dish's Colorado headquarters, company executives dismissed questions about whether Dish was really the meanest of mean companies.

"I think it's a challenging place to work," admits Dave Shull, a senior vice president at Dish in charge of content acquisition. He says it's common for meetings to be "animated," but he welcomes the company's aggressive ethos. "You can always be a follower, a slave to the competition and hope for the best," Shull says. "Or you can take the lead, try to grow market share and innovate. What happens in skiing or riding when you sit back is you lose control. We sit back."

 

After several years of growth, Dish, like the rest of the cable and satellite industry, is facing new challenges. In 2012, pay-TV providers added only a few tens of thousands of subscribers, analysts estimate. And the overall trend is not good. In response, Dish has aggressively worked to keep customer bills lower than its competitors. Dish's subscriber-related expenses rose to $7.25 billion in 2012, up 6 percent from the previous year, which the company attributes to rising programming costs. By comparison, DirecTV spent more than $13 billion on programming in 2012 (and another $2 billion on service), a 12 percent increase. "I would venture a guess that Dish's programming increases are among the lowest in the industry," Jayant says.

Still, that might not be enough. Dish now competes with Internet-based TV services like Netflix and Hulu (a subscription to either costs only about a third of the $49.99 for a basic Dish package), as well as web and TV combos offered by companies like Time Warner Cable and Comcast.

Unlike its competitors, Dish has struggled to expand into businesses other than satellite TV service. In 2011, the company completed its acquisition of Blockbuster, but failed to grow the brand into a viable Netflix competitor. Dish has been trying to make more of its wireless spectrum, which it paid about $3 billion to acquire, but has been thwarted by the FCC. The company has been trying to get a wireless network service off the ground lately, holding talks with Google and making an aggressive bid to acquire part of 4G network pioneer Clearwire Corp.

For now, however, Dish remains a "one-trick pony," as analyst Jayant puts it. Unlike Comcast, the company doesn't make its own programming, and unlike Time Warner Cable or Verizon, it doesn't have the ability to offer a TV/Internet/phone triple play. What it does have is the hopper, leading one lawyer defending the networks to conclude:

"Ergen would rather ask forgiveness than permission."

Some legal observers believe Dish will succeed in court. In November, a federal judge declined to issue an injunction to stop the hopper, saying Fox has a steep road ahead in arguing that Dish committed copyright infringement and breached its contracts with the network. However, the judge was not entirely convinced of the legality of Dish's system, and some lawyers believe the broadcasters will ultimately prevail. "I think a court will side with the broadcasters because of the economics, although a new [legal] test will have to be developed because this is not up to the usual standards," says Bryan Sullivan of Early Sullivan.

 

How the lawsuit plays out could determine Dish's ability to stay in the game based on the outcome of upcoming carriage negotiations. Ergen is making a multibillion-dollar bet that Disney can't afford to give up Dish's 14 million subscribers, but if the company signs a new deal, it will send a signal that broadcasters have gone a little overboard when it comes to the threat they accuse the hopper of posing.

If the deal doesn't pan out, Dish could go a new route. It could stream Disney's ABC anyway, without a contract but in partnership with a company like Diller's Aereo, whose proprietary technology of capturing TV signals over the airwaves and transmitting them privately online will likely be fought out in a messy process. (Dish and Aereo have reportedly been in talks recently). Or Dish could abandon the fast-growing cost of licensing ESPN's live sports to further position the satellite distributor as the cheap alternative in the market. But that's undoubtedly risky.

Analysts are already getting a little nervous. In a recent conference call, Dish management was asked what was going to happen.

"We're a big customer of Disney's," Clayton replied. "I wouldn't expect them to take it down with the AutoHop as a reason." Ergen added, "Our checks are pretty big." Dish pays Disney about a billion dollars a year for ESPN alone. But that's not enough to reassure the analyst community. "I have no idea what's going to happen," Jayant concedes.

As the recent legal battle between Dish and ESPN has shown, subscriber rates across the TV industry are intertwined thanks to the most favored nation clause (which guarantees that no competitor gets a better deal). If Disney accepts less than Dish's market value, it will likely have to discount other providers as well. And divesting from Dish doesn't necessarily mean losing all 14 million pay-TV customers if some of them defect to competing services. A recent survey by Lazard Capital found that 41 to 48 percent of pay-TV subscribers would cancel or switch their service if they lost a top channel, and 35 percent would quit if they lost ESPN. "If anything, the impact of content on distributors is getting stronger," concludes analyst Barton Crockett.

 

The last time Disney and Dish struck a deal, in 2005, negotiations lasted a year. Now it's just a few months until the license expires in September, and the very negotiators who will meet just sat uncomfortably next to each other in a courtroom for three weeks.

Disney declined to comment on whether it would move past the hopper, the legality of which is unlikely to be resolved before the two sides have to make a deal. A Disney spokesman says any renewal with Dish "would be consistent with established market terms." Dish's Shull won't say whether Ergen or his executives have met with Disney, but says he hopes the two companies will be able to work out their differences.

Is Ergen about to get the receipt for his evil behavior? Or will broadcasters bow to what many believe is the inevitable evolution of the advertising business? By year's end, the outcome of the Disney-Dish negotiations could signal where the industry is headed.

"For some people, it gets personal," Shull says. "For me, it's business. There's always some disagreement, but when there are billions of dollars at stake, greed usually wins out."

 

 

 

 

"We are a big customer of Disney's," Clayton answered. "I would not expect them to take it down with the AutoHop as the reason." Added Ergen, "Our checks are pretty big." Dish pays Disney roughly $1 billion a year for ESPN alone. But that's not quite enough to settle the analyst community. "I have no idea what is going to happen," admits Jayant.

As the recent Dish-ESPN lawsuit highlighted, thanks to "most favored nation" provisions (which guarantee that no rival will get a better deal), subscriber rates are intertwined throughout the TV industry. If Disney accepts less than market value from Dish, it likely will have to give discounts to other distributors, too. And walking away from Dish might not necessarily mean losing all 14 million pay TV consumers if some of them defect to rival services. A recent survey by Lazard Capital found that 41 percent to 48 percent of pay TV subscribers would cancel or switch their service if they lost a top broadcast network, and 35 percent would cancel if they lost ESPN. "If anything, content's leverage over distributors is strengthening," concludes analyst Barton Crockett.

STORY: CES: Dish Network Ups Ante With New Hopper Features

The last time Disney and Dish made a deal, in 2005, the negotiations took a year. Now, there's just a few months until the license expires in September, and the very dealmakers who will be meeting with one another just sat uncomfortably side by side for three weeks in a courtroom.

Disney declines comment about whether it would look past the hopper, whose legality likely will not be settled before the two sides need to make a deal. A Disney spokesperson says any renewal with Dish would "be consistent with established marketplace terms." Dish's Shull won't say whether Ergen or his execs have met with Disney, but says he hopes that the two companies will be able to work out their differences.

Is Ergen about to get comeuppance for his nasty behavior? Or will broadcasters bow to what many believe is the inevitable evolution of the ad business? By year's end, the outcome of the Disney-Dish negotiations could signal where the industry is headed.

"For some folks, it becomes personal," says Shull. "For me, it's business. There's always some difference of opinion, but with billions of dollars at stake, greed usually wins out."

Source: www.hollywoodreporter.com/news/dish-networks-charlie-ergen-is-432288?page=3

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