EchoStar Combining Sling Technology with Third-Party Software

EchoStar is combining Slingbox with third-party software as it seeks to expand the technology beyond its set-top boxes, company executives said Monday on an earnings call. Since unveiling Slingbox technology under the “TV Everywhere” banner at CES in January, EchoStar has sought to jump-start its Sling Media division that has struggled to gain design wins outside of its own products and Dish Network. EchoStar bought Sling in 2007 for $380 million.

EchoStar formed an alliance with Adobe earlier this year to allow support for the Adobe Flash platform on Sling Media products. The flash player and Flash streaming products are being included in Slingbox Pro-HD and Slingbox Solo devices to deliver H.264 audio and video. “There is a lot of complexity with Sling” and getting the required program access rights” has slowed the technology’s expansion, CEO Michael Dugan said. “I don’t believe there are lot of technical roadblocks. Sling is an educational process that we will continue to address."

Most of EchoStar’s growth outside of Dish hasn’t included Sling yet. It’s supplying set-tops to Telefonica for distribution to Latin American cable operators and also is providing products for a Dish Mexico joint venture with MDC Communications, which has more than 1 million subscribers. That’s up from 600,000 customers last fall. Dish Mexico is getting programming from EchoStar-8 at 77 degrees west. That service will switch to a Space Systems/Loral-built QuetzSat-1 Ka-band satellite at 77 degrees west that’s scheduled to launch in early 2011. Dish Mexico will get 24 of the 32 Ka-band transponders under a service agreement with SES Latin America, EchoStar said in a 10-Q filed at the SEC. EchoStar is also providing an HD/DVR set-top to Liberty Global’s German cable operator Unity Media, which has 4.5 million customers in 10 markets including Cologne, Dusseldorf and Frankfurt. Liberty bought Unity from Apollo Management in late 2009 for $3 billion and debt. “We just rolled out with them and its gone successfully so far,” EchoStar President Mark Jackson said of Unity Media. “We're hoping we will have a good long-lasting relationship with Liberty in Germany” and other European markets.

EchoStar’s joint venture with Asia Satellite Telecommunications (AsiaSat) started delivering an HD service June 1 in Taiwan, behind the original target of late 2009 (CED Oct 19 p3). The service uses the AsiaSat 4 satellite at 122 degrees east. The 48-transponder Ku/C-band Boeing 601HP satellite went into service in 2003. EchoStar supplied $18 million cash and an $18 million credit line to the joint venture. Dish Network also has leased 21 of 32 transponders on the Nimiq 5 satellite that’s operated by Telesat Canada. Dish will get service on the remaining 11 transponders during a phase-in period that ends in 2012. EchoStar has a satellite service pact with Telesat and a 10-year pact with Dish, the company said.

Outside of Dish, EchoStar’s U.S. focus has been on its ViP TV service that provides more than 300 channels. It was partly put together by converting SES Americom IP Prime customers, who were served by a C-band service, to a Ku-band offering. ViP TV has targeted regional telcos that in addition to programming, provides a fixed rate DSL service. “The uptake by small telcos is extremely slow,” leading EchoStar to shift some efforts to selling the service to hotels and universities, Dugan said. “We have to find the right balance of capacity to demand uptake,” he said.

EchoStar is “disappointed” the FCC rejected a license application for a C-band satellite at 84.9 degrees west, an EchoStar spokesman said. EchoStar applications will now be considered speculative and the number of licenses they can apply for will be limited, the FCC said. EchoStar has “several more weeks” to respond to the FCC decision and looks “forward to working with the FCC on this matter,” the spokesman said.

EchoStar swung to a $41.4 million Q2 net loss from a $101 million profit a year earlier, despite a sharp rise in revenue to $603 million from $383.1 million. The loss appeared partly tied to a $22 million loss on investments in Q2. While those exact investments weren’t disclosed, EchoStar has a stake in TerreStar. TerreStar’s net loss for the three months ended March 31 widened to $64.4 million from $49.4 million a year earlier on $3 million in revenue, according to SEC filings. TerreStar has said in SEC documents there is “substantial doubt” that its available cash would fund its needs through 2010. Two EchoStar representatives on TerreStar’s board resigned in January. EchoStar’s total costs and expenses also grew 48 percent to $571.7 million.

Sales to Dish soared to $501.6 million from $303.7 million, while those to Bell TV in Canada dropped to $50 million from $53.5 million. Other revenue, which includes Dish Mexico, rose to $51.4 million from $25.8 million. STB sales to Dish Mexico soared to $21.3 million from $3.7 million, EchoStar said. The STB business swung to a $822,000 profit from a $10.7 million loss a year ago as revenue increased to $532.2 million from $338 million. Satellite services posted a $7.4 million profit against a $1.9 million loss a year earlier as sales jumped to $66 million from $40.4 million.

Dish extended its agreement to buy satellite receivers from EchoStar to January 2012, EchoStar said. The previous pact expired Jan. 1, 2010. EchoStar also continued to suffer failures of the traveling wave tube amplifiers (TWTA) aboard EchoStar-3, the company said. The most recent failure occurred in May, leaving the satellite with only 12 of its 32 120-watt transponders operating. EchoStar’s monthly payment to SES World Skies also was reduced in March after the SES AMC-16 satellite it leased suffered problems with the solar arrays that reduced the number of available Ku-band transponders, EchoStar said. As a result, EchoStar cut the asset value of the lease by $35 million, the company said. -- Mark Seavy

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Dish Network plans to continue to go after the mobile TV market and will work to make sure its programming is available for tablets expected to hit the market in coming months, the company said during its Q2 conference call with analysts. The company will use its Sling product, which is owned by EchoStar and already available for the iPhone and iPad, to make TV accessible away from the home, said Tom Cullen, a Dish executive vice president. Broadband providers have not had a lot of contact with Dish about its increased reliance on Internet connection to push more content, he said. Still, the company continues to be engaged in Washington in the discussion on net neutrality and will further advocate the “light touch” approach being promoted by FCC Chairman Julius Genachowski, said Stanton Dodge, Dish general counsel. Dish lost about 19,000 net subscribers during the quarter due in part to troubles in the overall economy, Dish said. Dish has increased its set-top box inventory levels to prepare for higher HD subscription rates related to its free HD promotion, said Chief Financial Officer Robert Olson. Dish’s Google-enabled set-top boxes won’t have material impact for several quarters and will be deployed selectively, the company said. Dish revenue increased 9.1 percent to $3.2 billion for Q2 ended June 30 compared to the same period last year. Net income was $257 million for the quarter, up from $63 million in Q2 of 2009, Dish said.