EchoStar's Dish sale marks disappointing end to Charlie Ergen's ‘Seinfeld' strategy
EchoStar Sells Dish Network to DirecTV #
EchoStar has agreed to sell pay-TV provider Dish Network to DirecTV for $1 in equity and $9.75 billion in associated debt. This transaction, pending regulatory approval, marks the end of Dish’s long-standing attempt to combine pay-TV and wireless services.
The deal also appears to conclude what was known as the ‘Seinfeld’ strategy, a term first referenced in 2011. This strategy, which drew parallels to the structure of the popular 1990s sitcom, suggested that seemingly unrelated plot lines would eventually come together in a meaningful way.
However, the outcome of this strategy has been met with disappointment, much like the reception of the actual Seinfeld series finale. The sale of Dish Network for a nominal price, along with billions in debt, represents a significant decline in the company’s value.
EchoStar’s shares fell more than 10% following the announcement. The company’s CEO acknowledged that the content distribution industry has been declining rapidly, losing customers at a considerable rate.
In recent years, Dish Network struggled to transition into a nationwide wireless carrier while simultaneously losing millions of pay-TV subscribers to streaming services and operators offering high-speed broadband. Combined, Dish and DirecTV have lost 63% of their video subscribers since 2016.
The enterprise value of the company has plummeted dramatically. In 2014, when merger discussions between Dish and DirecTV were ongoing, the market capitalizations of the two companies were significantly higher. DirecTV was later sold to AT&T for $49 billion in equity value, while Dish remained independent and saw its value diminish as satellite TV became increasingly outdated.
Earlier this year, EchoStar and Dish merged back together after separating in 2008. The motivation behind moving Dish and its debt off EchoStar’s balance sheet was partly due to a $2 billion debt payment maturing in November.
Dish’s attempts to combine its pay-TV business with wireless services faced numerous challenges. Despite acquiring Boost Mobile and participating in spectrum auctions, the company struggled to secure the necessary capital to build out a nationwide network while managing its declining pay-TV business.
The company’s CEO admitted that they couldn’t properly support the wireless business, and the divided focus of the company caused management distractions. This outcome for Dish Network is viewed by many as a disappointment, drawing parallels to the mixed reception of the Seinfeld series finale.