Analysts: Dish Network Suffered 'Worst' Subscriber Loss5 Aug, 2015 By: Erik Gruenwedel
Dish CEO: 'Netflix is the most powerful content aggregator in the world today'
With cord-cutting accelerating and relatively few broadband subscribers, Dish Network CEO Charlie Ergen recognizes that simply downsizing the channel bundle is not an option if he wants to stay in business.
With rival satellite operator DirecTV recently acquired by AT&T, Dish is trying to position itself as a trendsetter in over-the-top video through Sling TV.
Launched in February, Sling generated 169,000 subscribers by the end of March, while Dish reported a loss of 134,000 subs.
While Dish hasn’t revealed Q2 sub gains for Sling, research firm MoffettNathanson believes the OTT video service added 70,000 subs through June 30. Coupled with Dish reporting a drop of 81,000 subs in the quarter, and it seems the satellite operator generated its worst-ever quarterly sub loss (151,000).
“The sub loss was still in the range [two-times] what was expected,” analysts Craig Moffett and Michael Nathanson wrote in an Aug. 5 email following the fiscal call. “Even allowing for the fact that they may now be actively steering some customers to Sling rather than Dish, their core [satellite TV] business is clearly struggling.”
It’s a sentiment seemingly shared by Ergen.
Speaking on the fiscal call, Ergen said pay-TV operators have lost millions of video subs over the years to OTT video, largely due to indifference. And rushing to downsize the channel bundle is not the answer.
“The Netflix phenomena makes it very difficult to get into that lower-priced [channel] tier and make any money,” Ergen said.
Specifically, the CEO said pay-TV subscriber acquisition costs (SAC) dwarf comparative SAC costs for Netflix and other SVOD services.
For example, when adding up a service call, equipment install, satellite dish, set-top box and subsidized premium channels for a year or more for a new subscriber, the SAC cost can exceed $1,000, according to the CEO.
“You can’t justify that for a $20 to $30 monthly subscription,” Ergen said. “It doesn’t make [economic sense].”
Indeed, the SAC cost (less than $100) to acquire an OTT video sub pales in comparison to pay-TV depending upon whether the sub has a smart TV or streaming media player.
“I’m trying to steer our thought process here [at Dish] to that,” Ergen said. “It doesn’t matter where we get the customer. We’re paying the [content] programmer the same. If we get a Sling customer or a Dish customer and they both have ESPN, in the end we write the check to ESPN [regardless]. That’s the bottom line.”
Dish posted a profit of $324 million on revenue of $3.8 billion in Q2. It ended the quarter with 13.9 million pay-TV subscribers; 595,000 broadband subs.