EchoStar Turns Up the Heat on Cable Rivals

Its purchase of Sling Media gives it a competitive edge—and could raise the ire of companies with lucrative TV subscriber revenue

by Arik Hesseldahl

EchoStar's planned purchase of Sling Media is likely to step up a battle between the satellite TV provider and a raft of rivals. It may also bring EchoStar a few new ones.

EchoStar (DISH) said on Sept. 24 it will pay $380 million for Sling Media, maker of the popular Slingbox TV device that connects to a home TV set, letting users watch what's on that TV—whether it's stored on a video recorder or being broadcast live—by way of an Internet-connected PC from anywhere in the world.

Although considered something of a curiosity at the outset, the so-called place-shifting concept behind Slingbox is taking off. On average, Slingbox owners watch 1.6 hours of TV on their laptops each day, and 40% of that time at home, as opposed to on the road. "People are turning their laptops into kitchen TVs," says Sling Media CEO Blake Krikorian. In the last year the business has also grown to include services that let customers watch shows on mobile phones from the likes of Palm (PALM), Nokia (NOK) and those running Microsoft's (MSFT) Windows Mobile software.

Sling Media's customers so far number only in the "hundreds of thousands," Krikorian says. No matter. The plucky Foster City (Calif.) startup has secured plenty of venture capital from the likes of Hearst, Mobius Venture Capital, Hercules Technology Growth Capital (HTGC) and EchoStar.

New Products on the Way

EchoStar has said little about its precise plans for Sling Media, but adding place-shifting features would give its lineup a clear competitive advantage over rival DirecTV (DTV) and cable operators like Comcast (CMCSA) and Time Warner Cable (TWC). EchoStar CEO Charlie Ergen said in a statement that the deal enables his company to offer "innovative and convenient ways to enjoy programming on more displays and locations, including TVs, computers, and mobile phones, both inside and outside the home."

To that end, Sling Media has a new stable of products teed up. Soon it will announce the availability of software that works on mobile phones running the Symbian operating system, which includes most of Nokia's advanced wireless phones. Also coming down the pike: Slingbox Solo, a low-cost version of the Slingbox with standard-definition and high-defintion features. Another is the SlingCatcher, which pushes content from one Slingbox to an additional TV in the house over a home network.

Splitting Up the Company?

Besides beefing up EchoStar's arsenal vs. satellite and cable providers, Sling Media could bring EchoStar to new competitive terrain. EchoStar said on Sept. 25 it's considering splitting its businesses into two separate, publicly traded companies. One would be the consumer-focused subscription-TV operations, while EchoStar would spin off international operations and the division that makes set-top boxes. SlingMedia would likely become part of the new entity, packing its software and features into set-top boxes that would compete against those from Motorola (MOT) and Scientific Atlanta, a unit of Cisco Systems (CSCO).