A third of the people who read this column don’t live in the USA so maybe this prediction isn’t interesting to them, but I think Apple will buy Dish Network, the American direct satellite TV broadcaster. It’s the only acquisition that will give Apple the kind of entry point they want into the TV business, allowing Cupertino to create overnight an over-the-top (OTT) Internet streaming video service — effectively an Internet cable system.
Buying Dish would be a bold move for Apple because all the benefits Cupertino seeks aren’t obviously available. True, Dish has 14 million U.S. subscribers (I am one of those) who get 100+ channels of TV from the sky. True, Dish has an existing OTT streaming service called Sling that already offers a subset of the company’s cable channels. But it doesn’t necessarily follow that Dish could simply transfer its satellite content to the Internet, at least beyond what it does already with Sling.
There is, however, a long tradition of brash TV operators being rewarded for their brashness. The heart of Ted Turner’s first fortune was WTBS, the UHF TV station in Atlanta that grew out of his family’s billboard business. Turner threw WTBS up on a satellite giving his episodes of All in the Family a national reach that to many didn’t seem to be supported by Ted’s syndication contracts. Still, WTBS is a success today, so it worked. And don’t forget how Netflix paid only $25 million per year to Starz back in 2008 for access to 2,500 Disney and Sony movies that would cost hundreds of millions today. Starz was Netflix’s streaming killer app. And Dish will be Apple’s because gaining access to all that content will be worth to Cupertino whatever it costs. Even if it destroys Dish in the process, Apple will succeed, which is exactly why they will succeed.
Dish is for sale. Every company is for sale but Dish is especially so following AT&T’s acquisition of Dish’s main competitor, DirecTV, last year for $48 billion. Apple won’t have to pay that much for Dish but they could. Each Dish employee represents only $800,000 in sales so many of those 19,000 workers will have to go. But if Apple outsources just satellite dish installation and customer support they’ll easily pull the revenue numbers up toward the target $2 million per employee.
One Dish employee Tim Cook will be sure to keep is CEO Charlie Ergen — a tough-yet-charismatic operator who built Dish from scratch and knows his industry. Apple won’t succeed without a Charlie Ergen at the TV controls. Ergen’s already a billionaire but he’ll stick around for a chance to turn TV on its head.
But acquiring Dish would do more than just turn TV and maybe movies on their heads, it would have an impact on mobile phone and data service, too. Dish is one of the largest owners of unused wireless spectrum that can be used as a bargaining chip in those content negotiations or possibly put Apple into the wireless data business. Dish also sells the Slingbox, which allows watching your cable or satellite content over the Internet, so there’s a patent-protected addition to the Apple TV available, too.
Apple wants in the content business but buying Time Warner (not Time Warner Cable) won’t do it. Apple needs hundreds of networks, not just 14 channels of HBO. In order to succeed Apple needs to acquire a company that has legacy rights to that content — rights that Apple can through sheer force of will ride for a year or two until the market transitions and cable TV starts to die.
Yes, Apple wants to kill cable TV. So do AT&T and Verizon. So do Microsoft and Sony. So did Intel until it gave up. The difference is that Apple’s deep pockets and Dish’s moxy can actually make it happen.