The comments came during a Thursday call on Ergen and other Dish executives took questions about the company’s latest earnings results, which fell short of analysts’ expectations.

While most of the call was dedicated to Dish’s high stakes bid for Sprint, which would give it the chance to offer mobile-broadband-TV packages, analysts also asked Ergen about his company’s ongoing spat with broadcasters. In recent months, Dish has incensed the networks by selling “the Hopper,” a popular product to skip commercials, and touched off rumors that it might buy Aereo, which allows viewers to watch TV on their phones for $8 a month.

On today’s call, however, Ergen sounded more conciliatory.

“We admire what [Aereo is] doing. We indirectly get a benefit as it puts downward pressure on retransmission consent fees.. But all things being equal, we’d prefer to work with the broadcasters,” he said. The broadcasters are equipped to do something themselves. We’re more likely to work with existing partners.”

The rhetoric is part of a complicated dance between pay TV providers, including Dish, and content owners over the spiraling cost of programming; in this struggle, services like the Hopper and Aereo have become a source of leverage for Dish.

On the call, Ergen repeated his call for smaller cable “bundles” and more a la carte offerings.

“At the end of the day, if the bundle price gets too high, [consumers] will find other ways to do it — they’ll use small antennas, they’ll steal programming.”

Ergen added that he believes the traditional dual stream model for TV, consisting of subscription and advertising revenue, will continue thanks to new mobile opportunities. In particular, he said that mobile viewing opened the prospect of valuable local-based ad targeting that will result in tailored ads being delivered to the living room, tablets and smartphones.

He added that some “forward looking broadcasters” were already on board in exploring new bundle opportunities with Dish.

“I’ve never met a programmer or broadcaster that was against making more money.”

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On Monday, the Sprint’s board announced that it has formed a special committee of independent directors to “carefully evaluate” Dish’s $25.5 billion offer to buy up the company. But it also wants to keep its original $20.1 billion deal with SoftBank deal on track — despite Dish’s attempts to put it on hold.

On Friday it asked the Federal Communications Commission to keep its official review of Sprint-Softbank going, keeping the deal on target for final approval this year. The FCC is already 140 days into its initial 180-day review, but the U.S. Department of Justice has asked the FCC to delay proceedings while its National Security division looks into foreign ownership issues.

When Dish countered SoftBank’s offer last week it asked for a suspension of the regulatory review, but Sprint said there is no reason to stop clock even as Sprint negotiates with Dish. In fact, in its FCC filing Sprint accused Dish of political maneuvering to muck up the SoftBank deal. From the letter:

“DISH wrongly suggests that it would be prudent for the Commission to derail this review while it waits until an alleged uncertainty – uncertainty that DISH itself is attempting to create by its unsolicited proposal – is resolved. DISH has this exactly backwards. The Commission has been working diligently on the pending applications, which now stand at day 140 of the Commission’s shot clock. The Commission must not be distracted by DISH’s latest maneuverings, just as it was not distracted by DISH’s original request, and, based on long-established precedent, continue the orderly processing of the applications to conclusion.”

Meanwhile, the special five-director committee will weigh whether the Dish’s bid represents, or will likely lead to, a “Superior Offer” to Softbank’s. Dish may be offering more money, but as TMF Associates analyst Tim Farrar points out, Sprint has to look at other factors besides value to determine if a Dish-Sprint tie-up is worth the trouble.

Dish may offer Sprint some strategic advantages — combining both companies’ spectrum with Sprint’s mobile network and Dish’s satellite TV service — but if SoftBank matches Dish’s offer, Sprint may figure it can buy whatever strategic advantages it needs with SoftBank’s cash.

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Freesat, which is backed by the BBC and U.K. TV network ITV, is a set-top satellite TV box that offers 180 channels and doesn’t require a monthly subscription. YouTube will be available on the premium internet-connected version of the box, which costs £279 (USD $438.70) and offers HD recording and on-demand viewing.

U.K. customers can already watch YouTube on internet-connected TVs or with Apple TV, but the Freesat partnership brings YouTube content to a larger audience: Freesat announced that it’s just sold its three millionth box, though not all of those are internet-connected, and that is now in about 1.7 million U.K. households.

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Mark Phillip

Phillip’s creation is an application called Are You Watching This?!, or RUWT, something with which sports fans might already be familiar. It’s already available on iOs and Android devices, as well as on web browsers, and it constantly analyzes streams of sports data to let fans know what games they should be tuning into and where they can find them on TV and enables them to vote on games Digg-style. For Google TV and TiVo users, RUWT actually lets them change the channel to tune in to a game.

Now, RUWT is looking to make an even bigger impact — and lots of money — by opening its API to third parties. And Phillip says the broadcast-television world is drooling with anticipation; an unnamed cable company already tried to buy RUWT a couple of times, says Phillip. Not only do they see the potential to revolutionize how people watch sports on TV, but RUWT’s technology could be expanded to all types of programming.

First, a primer

In order to understand why Phillip thinks RUWT could be such a game-changer, you have to understand how sports broadcasting works. The problem for sports fans, he explained, is that on one out of every four days, there are more than 100 sporting events being broadcasted. On Nov. 14, 2009, there were a whopping 510 games broadcasted.

Games are spread across more than 8,000 channels, and differences between provider channel lineups and geographies result in more than 2 million possible programming combinations. It’s hard enough to know what’s on where you live, much less figuring out what’s worth watching.

What RUWT does, Phillip said, is keep track of what’s on and where, as well as the hundreds of data points streaming into its system during every game that’s on. An algorithm rates games based on the number of exciting things going on (e.g., lead changes, overtime, a big upset in the making or a no-hitter going into the eighth inning) as well as by the input of RUWT’s roughly 25,000 “super fans” at any given time. Users looking at the RUWT app on their screens will see a scoreboard-like interface with games tagged either “OK,”  ”Good,” “Hot” or “Epic,” and can tune in accordingly.

Actually, Phillip said, it’s the fan voting that helps separate RUWT from its primary, and larger (RUWT is a one-man show) competitor, Thuuz. Fans help provide subjective influence that algorithms just can’t determine, perhaps things such as a plethora of great slam dunks or hard hits during a hockey game. It’s like Digg or Reddit, only for live games. So far, RUWT has rated more than 150,000 games across a dozen sports.

Of course, left solely up to fans, he acknowledged, anything involving hugely popular teams such as the New York Yankees or Dallas Cowboys would always rate the highest, so the objective data analysis is necessary. “You have to nail it all,” he said, “or no one’s willing to pay you for it.”

The utility of a service like RUWT doesn’t end when the day’s games are done. Phillip said fans can rank games after they’re finished and before they start, and the system also keeps track of results, which helps in predicting how exciting future games will be. Everyone might suspect that a New York Yankees versus Boston Red Sox game will be worth watching, but RUWT can use history and pre-game excitement to let you know in advance whether a seemingly mundane game might be a classic.

How RUWT could change TV viewing

Now that Phillip is letting third parties pay for access to the RUWT API, he suspects a sea change is in the making in the way we watch television, and one that could help keep traditional providers from losing business to web-based services. In fact, he told me, “an unnamed cable company tried to buy me out a couple times.”

How RUWT might work on the TV

Live sports is the lowest-hanging fruit for cable, given it’s the primary reason many consumers keep their cable and satellite contracts instead of migrating entirely to streaming services. The way Phillips envisions it, RUWT could be available as a white-labeled app from your service provider (like the NFL RedZone channel, but for all sports) and could also proactively alert viewers to exciting games happening on another channel. So, while you’re watching a “Law and Order” rerun for the hundredth time, an alert might pop up telling you your alma mater is going into overtime on one of the sports channels buried at the bottom of your channel guide.

He also thinks sports-bar chains such as Buffalo Wild Wings could leverage the service to know what games to turn on during the day, and to market promotions before or even during games based on what’s going on.

Going forward, there’s no reason RUWT couldn’t be adapted to include everyday programming and alert viewers to what they might want to watch but not know is on. That would help create a personalized experience similar to what users can get with a service like Hulu. “I shouldn’t have to search for great content if I’ll gladly give [my TV provider] all my Facebook likes or Netflix likes,” Phillip said.

Right now, however, Phillip said most cable and satellite providers (save for maybe the web-centric FIOS and U-verse) are hindered by outdated set-top boxes, so they’re not quite ready to use RUWT to its full potential. Phillip’s only user as of now is AOL’s The Sporting News site, but he said he has had many meetings with television providers, and a “very large sports property” is working with him on a new mobile app. By March Madness later this month, he said, RUWT should have four official customers.

An interesting side note is that RUWT isn’t the only company trying to save the cable and satellite businesses by using data. In January, I covered a project by analytics firm Opera Solutions that aims to create peer-to-peer networks of set-top boxes grouped by users’ preferences in streaming movies. The idea is that the algorithms would provide more-accurate recommendations, and the geographic proximity of other network points would speed the download process.

Opera’s approach is somewhat different from RUWT’s, but the idea is the same. If you’re able to give subscribers the content they want and to curate it so they can sort through the noise of hundreds of channels and thousands of movies, Phillip said, “people will be more comfortable paying their cable bill.”

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AT&T is petitioning the Federal Communications Commission to impose network buildout conditions on Dish’s satellite spectrum –- requirements that would be passed onto AT&T if it acquired the satellite TV provider. Meanwhile, Dish insists it plans to use that spectrum to build a commercial LTE network to challenge the reigning nationwide mobile operators, including AT&T. These are hardly the actions of two companies about to tie the knot.

What we’re witnessing here is some very cynical pre-nuptial gamesmanship. According to TMF Associates satellite communications analyst Tim Farrar, Dish is playing AT&T off its competitors by threatening to partner with MetroPCS to build a nationwide LTE network over its satellite broadband and 700 MHz spectrum. To muck up Dish’s plans, AT&T is insisting to the FCC that the satellite TV provider face the same strict rollout requirements the commission imposed on fellow satellite spectrum holder LightSquared: An LTE rollout covering 100 million people in 33 months and 260 million in less than 6 years.

As Farrar wrote in his blog:

This submission is a blatant attempt by AT&T to put a thumb on the scales, as the FCC weighs up the appropriate balance between buildout mandates and clawback of any windfall. The reason for AT&T’s action at this very late stage in the process appears to be that DISH is trying to play off AT&T’s prospective bid against a potential venture with MetroPCS. MetroPCS would certainly be unwilling to commit to a 260M POP buildout, so if the FCC conceded AT&T’s demands, they would be the only game in town and DISH would lose its leverage in price negotiations. We’ll find out soon enough if AT&T’s gambit succeeds, but few would bet against [Dish chairman] Charlie Ergen’s poker playing skills after the events of the last year.

AT&T may seem like the bad guy here, but Dish’s motives are just as suspect. In an FCC filling Thursday, Dish maintained it plans become a competing mobile operator, launching an LTE network that would compete with the big 4:

The overly aggressive and unrealistic schedule AT&T advocates would likely set DISH up for failure or force DISH into unfavorable business arrangements with large Commercial Mobile Radio Service (“CMRS”) carriers.  It would erect artificial barriers to DISH’s plan to construct a new mobile broadband network on its own or consideration of partnerships with smaller companies, and could threaten DISH’s ability to roll out a retail service.  In short, an impracticably tight schedule would be a triple loss for consumers, the Commission, and DISH.

But as my colleague Stacey Higginbotham wrote when Dish first applied for permission to build LTE, Dish’s proposal sounds more like a financial gamble to cash in on the skyrocketing value of mobile broadband spectrum, rather than a legitimate bid to become a wireless competitor. One big clue is Dish’s insistence on deploying an LTE-Advanced network in order to “enter the market for the first time with the most advanced technology.” Of course, LTE-Advanced was just finalized as a standard so Dish claims it will have to wait several years before commercial equipment is available.

That’s absolute malarkey. LTE-Advanced is an iteration of LTE technology, not a completely new network. Claiming that you must wait until LTE-Advanced equipment is available before building a network is kind of like insisting you can’t move into a house before the shag carpeting is installed. There’s nothing stopping Dish from building an LTE network this year and evolving it into an LTE-Advanced network in 2013 or 2014.

Supposedly we face a spectrum crisis, but no one is acting like it. Instead of using public airwaves to deploy real networks, operators seem to be playing high-stakes poker with their licenses. AT&T’s motives may be self-serving, but maybe in this case it’s right. If it forces strict rollout guidelines on Dish’s spectrum and then buys those licenses, we may actually get a new mobile broadband network – rather than a bunch of operators whining about how they don’t have the spectrum to build them.

Poker Image courtesy of Flickr user Ross Elliott
Tower Image courtesy of Flickr user Nikhil Verma

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What Apple does and doesn’t do

For a clue to how Apple approaches the video market, you need look no further than how it’s dealt with every other part of the media ecosystem to date: It creates good user experiences across an ecosystem of great products that publishers can sell their content on.

It introduced the iPod and iTunes and allowed the music industry to sell their songs on the platform, and it took a cut. It introduced the iPhone and the App Store and allowed developers to create games, utilities, productivity tools and the like, and it took a cut. It introduced the Apple TV for the Hollywood studios and TV networks to rent and sell their movies and shows to consumers, and it took a cut. It introduced the iPad, iBooks and the Newstand and allowed book and magazine publishers to sell digital versions of their titles to consumers, and it took a cut.

You notice a trend here? Product, platform, revenue share. That model has been extremely profitable for Apple, in part because it’s had to bear little risk to collect whatever revenues and profits come from its partners’ content sales. What Apple does not do is pay upfront to have the luxury of carrying content and then shoulder all the risk while attempting to create a sustainable new business model for its partners.

The economics of the situation

But let’s talk about the actual economics of subscription pay TV. Time Warner Cable announced in its earnings Thursday that it paid somewhere around $25 a month per subscriber in content costs last quarter. Think Apple could do better? It can’t. Any new entrant to the pay TV market acquiring content licenses does so at rates higher than what others have previously negotiated. This was true when the satellite TV companies entered the business, it was true when Verizon and AT&T began offering IPTV services, and it will be true for anyone that attempts to create a virtual cable company.

Starting costs for Apple — or anyone else for that matter — to build a subscription TV service will be in the mid-$30s at the very least. Which means it’s not going to roll out a $25 or $30 subscription service or undercut your local cable company on price anytime soon.

You know how every quarter analysts dissect however many billions of dollars Microsoft has lost in its Internet services business? That would be Apple TV’s media business, quarter after quarter, if it decided to go down this road. Sure, Apple has a lot of money. And sure, Apple could bear those costs. But why would it? What’s the actual benefit for Apple or its investors?

The misplaced dream of a la carte

“But what if I don’t want all of the channels? That’s where Apple could really disrupt things!” It’s a familiar refrain to hope and wish and pray that a company like Apple will be able to do what others have failed at so far, and negotiate a la carte pricing for individual networks. That sure sounds good, and I’m sure consumers would love it! That is, until they saw the price tags associated with each of the networks that they would want to buy.

Even if Apple were able to convince Disney, for instance, to separate ABC, the Disney networks and ESPN’s sports networks from the bundle, it would be just like breaking up any other bundle: the cost to sell each network separately would be egregiously expensive. Prohibitively so.

As a consumer, would you pay $5 just for ABC? Another $5 each for CBS, NBC and Fox? Then $15 or $20 for ESPN? And $25 for HBO? It’s not like these guys are just going to give those channels away at a small premium over what they get from cable. If they’re going to break the subscription bundle, they’re going to want to get paid to do it. In that world, how many channels do you think you could buy before the cost became more than what you already pay for a cable subscription each month?

The actual market opportunity

Put all that aside, though, and the truth of the matter is that streaming video is still a relatively niche market. How many people are out there who actually have an interest in a streaming TV service? In theory, the addressable market is every broadband household that also pays for cable service. But take a look at the number of Apple TVs that are out there (just 4.2 million) or the connect rate on smart TVs today, and you see that very few people are actually taking advantage of broadband-delivered video. That could change with the introduction of the mythical iTV, but it seems pretty tiny today.

Sure, Apple created the modern smartphone market with the iPhone or the tablet market with the iPad. But it’s not into creating new services. And it seems unlikely that Apple would introduce a new service like this, especially one that is likely to be risky, unprofitable and targeting a market segment that doesn’t yet exist.

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The pact was made possible in part through both companies’ participation in the RVU Alliance, a consortium formed to work on advanced remote user interface (RUI) technology. But DirecTV isn’t the only operator able to make use of Samsung’s “set-top boxless” technology — since it’s embedded the tech in all of its connected TVs, other partners could potentially deliver multi-room viewing with only a single box in the home.

The Samsung and DirecTV joint announcement follows a number of other operators that have moved toward software-, rather than hardware-based options for channel navigation and video distribution to the TV. Whether it’s Verizon’s introduction of a multimedia gateway that will stream live TV to tablets, gaming consoles and other devices, AT&T teaming up with Microsoft to let consumers control their TV through an Xbox, or Comcast’s reimagining of an electronic programming guide in the cloud, the trend is clear: Operators are looking forward to doing away with costly hardware that can be replaced with software-based solutions.

As more connected devices hit the market and more operators get comfortable with creating IP- and cloud-based solutions, that trend will only continue. And for anyone who’s had the same crappy box sitting in their living room for the last five years, that’s good news indeed.

Photo courtesy of (CC BY 2.0) Flickr user Tanjila Ahmed.

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Monday afternoon at the Consumer Electronics Show, Dish announced that the Blockbuster service, which had previously been called Blockbuster Movie Pass had massively expanded the number of titles available. Along with the new name, Blockbuster @Home, Dish announced that it hopes to increase its appeal with families through the expansion of new childrens programming. Dish has added more than 3,000 kids titles, including shows like Veggie Tales, Inspector Gadget, Heathcliff and Strawberry Shortcake.

Viewers can now tune into 25,000 titles from their web browsers. Not all of that content can be viewed on the TV, however; only 10,000 of those titles will be viewable on the big screen. Even so, the addition of new content will help Blockbuster @Home to compete with other streaming subscription services, like Netflix or Hulu Plus.

We lamented the lack of programming at launch, but the aggressive growth of Blockbuster’s library means it could become a real contender as time goes on. The only thing holding it back now is that the service is only available to Dish satellite TV subscribers.

Blockbuster @Home is $10 per month and, in addition to the streaming titles, offers up more than 100,000 DVDs which can be ordered by mail and exchanged in Blockbuster retail locations. Subscribers can also access more than 3,000 video games by mail through the service. And viewers can tune in not just through their web browsers or TVs, but through Dish’s Remote Access iPad app.

At the show, Dish also introduced its new Hopper and Joey whole-home DVR products. For more information on those, check out this earlier story.

Photo courtesy of Flickr user Andrew Levine.

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At the center of Dish’s new whole-home DVR solution is a set-top box called the Hopper, which includes a 2TB hard drive capable of storing up to 2,000 hours of video content. It also includes Joeys, which are smaller, thin-client devices that can stream live or pre-recorded content to any room in the house. Not surprisingly, the Hopper and Joey boxes were built by Dish’s sister corporation EchoStar, and take advantage of the Multimedia over Coax Alliance (MoCA) spec.

The Hopper has three tuners, but here’s the twist: One of those tuners is set to record all four major broadcast stations during primetime hours. Called “PrimeTime Anytime,” the new service automatically DVRs the most popular and most watched shows from ABC, CBS, Fox and NBC. That means that Dish users will have access to eight days worth of broadcast content without having to worry about setting their DVRs. In addition to PrimeTime Anytime content, Dish subscribers can record two more programs from other channels, meaning the DVR can store up to six programs simultaneously during prime-time hours.

For those who connect their set-top box to the Internet, the Hopper will be able to access thousands of streaming titles from Dish’s Blockbuster service, which is being renamed Blockbuster @Home. And, the satellite provider is also rolling out a new feature called Dish Unplugged, which will allow satellite users without broadband access to view hundreds of popular on-demand movie titles by downloading them directly to the Hopper’s hard drive.

Due to the introduction of PrimeTime Anytime and Dish Unplugged, much of the Hopper’s recording capacity will be used up at any given time, meaning subscribers won’t be able to take advantage of the full 2TB themselves. However, even with those services, they’ll be able to record about 1,000 hours of SD programming or 250 hours of HD programming on the box.

Finally, in addition to more advanced recording capabilities, the Hopper will feature TV apps that give subscribers access to social networks, games, news, weather, sports and stock information. And subscribers will be able to access and manage the DVR and other features through the web or through Dish’s Remote Access App.

For Dish, the bet on the DVR runs somewhat counter to other pay TV operators, which are trying to win over customers with more on-demand content, as well as greater access to streaming titles through TV Everywhere initiatives. But given the fact that Dish doesn’t provide broadband services to its customers, that’s probably a good idea. Giving them as much content as possible through its own satellite feed and set-top box might be one way to ensure that they don’t go to Hulu and other services to catch up on shows they might have missed.

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