I cannot forecast to you the action of DISH Network (Nasdaq: DISH). It is a riddle wrapped in a mystery inside an enigma, but perhaps there is a key. That key is the hard-nosed independence of chairman and mastermind Charlie Ergen.
With apologies to Winston Churchill for ripping off his famous speech on the Russian enigma, that's how I feel about the second-largest satellite broadcaster.
What does this thing do?
The mystery started in earnest when DISH bought movie rental maven Blockbuster in a bankruptcy fire sale. Asked to explain the reasoning behind this strange use of $320 million, Ergen made the memorable comparison between his strategy and any episode of Seinfeld: "You'll have to just wait and see where it all comes together," he said. "It's a little hard to explain it this early in the show."
The company also bought two more puzzle pieces in bankruptcy sales -- spectrum-rich satellite operators DBSD North America and TerreStar Networks. When the courts approved these bids, I mused that DISH might be working on an earthbound wireless network of some kind. "Slap the Blockbuster brand on a video service over the radio waves," I thought aloud, "and you might get a Frankenservice that makes sense." Indeed, DISH quickly filed a petition to run ground-based LTE Advanced services on the acquired spectrum slices.
Last week, Ergen again begged the FCC to approve that petition, which has been challenged by a gaggle of wireless network operators. LTE Advanced is a network standard still under construction, the feature set had been frozen in 2011. To put the progress into context, the first 3G feature freeze happened in 1999, and those networks weren't mature enough to support an iPhone until 2008.
Long-term plans
It'll be years before DISH can actually implement the 4G Advanced network it wants. But then, it'll offer gigabit speeds to wireless targets that don't move much, like the media center in your living room.
In other DISH news this week, the company is expanding its content agreements with Time Warner's (NYSE: TWX) HBO in a big way. With an HBO or Showtime subscription and just the right DISH DVR receiver, you'll soon get "instant access to virtually every episode of every season of the best HBO shows," from The Sopranos to Game of Thrones. Moreover, that DVR will quietly download even more HBO content via satellite for later on-demand viewing.
The satellite download makes DISH's on-demand content less dependent on a broadband Internet connection. With DISH's own broadband plans still up in the air and still years away in the best-case scenario, that's an important detail.
Can you feel the plan coming together yet?
But wait -- there's more!
Warner is imposing an even longer rental delay on its film library these days, 56 days rather than the old 28. Netflix (Nasdaq: NFLX) shrugs its shoulders and complies with the new requirements. "Netflix wants to ensure members have continued secure access to Warner Bros. DVDs and Blu-ray discs and, as such, is accepting the 56 day holdback," said Netflix VP of Content Anna Lee, presumably with bulging neck veins and steam rising from her ears.
But not Charlie Ergen. No way.
Bloomberg reports that Blockbuster stores are now buying new Warner films at retail instead of directly from Warner, ready to rent right away. This is of course perfectly legal under the First Sale Doctrine, but it's expensive for Blockbuster and not a great way to make friends in Hollywood. Time Warner just can't tell Ergen what to do.
This one goes over here, and ...
Putting together the puzzle pieces we have today, it looks like DISH is planning to reduce its reliance on expensive satellites over the next few years. Blockbuster provides content by hook or by crook. The FCC had better approve Ergen's wireless network plans or else suffer his scorn. If it all comes together as planned, it'll really be like a terrific Seinfeld episode where you couldn't see the punchline coming until it was delivered. And it's all powered by Ergen's blood, toil, tears, and sweat as each of the components is facing serious resistance along the way.
"We may be sure that the world will roll forward into broader destinies," Churchill said in his Russian musings in 1939. So, too, does the entertainment industry roll forward into a brave new digital era -- and Charlie Ergen is hell-bent on keeping his DISH Network relevant in the new age.
The riddle unravels, and I like what I see inside. I'm so impressed by the connections I'm seeing for the first time that I'm betting my CAPS score on Ergen's mule-headed stubbornness with a thumbs-up CAPScall on DISH.
Click here to add DISH Network to your watchlist. Armed with a steady flow of news and Foolish analysis, we'll unwrap the layers of this mystery together.
