Dish Adds Fewer Subs as Earnings Drop in First Quarter

3:15 AM PST 05/09/2013 by Georg Szalai , Paul Bond
Alex Wong/Getty Images

The satellite TV company, founded by Charlie Ergen, added 36,000 net new subscribers and said weaker Blockbuster results were a drag on revenue.

Dish Network on Thursday reported lower first-quarter financials amid higher expenses and lower revenue at video rental arm Blockbuster.

The satellite TV company, founded by chairman Charlie Ergen, signed up 36,000 net new subscribers in the opening quarter of 2013 to end March with 14.09 million. In the year-ago period, it had added 104,000 subscribers.

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Dish posted earnings of $216 million, compared with $360 million in the year-ago period. It cited "higher subscriber-related expenses driven by increased programming and subscriber acquisition costs" as the culprit. Also, results from the first quarter 2012 were boosted by a $99 million gain.

Revenue of $3.56 billion compared with $3.58 billion in the year-ago period and came in slightly below Wall Street estimates. "The decline was driven by reductions in our Blockbuster segment," the company said. Pay TV subscriber-related revenue rose four percent to $3.35 billion, though.

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"We have been pleased with the market's response to our Hopper with Sling rollout despite head winds from our first price increase in two years," said Dish CEO Joseph Clayton.

Executives said during a conference call with analysts that churn among customers with the Hopper is lower than it is among those with "traditional equipment," but that marketing costs are high. Ergen said the Hopper is much better than DirecTV's Genie, but DirecTV is marketing their DVR better, with the advantage that broadcast TV takes Genie commercials but not Hopper commercials due to the latter's advanced ability to skip ads.

Ergen spent much of the lengthy conference call discussing Dish's and SoftBank's separate efforts to purchase Sprint. SoftBank has offered $20.1 billion for Sprint while Dish has offered $25.5 billion.

Ergen said that, ironically, he wouldn't use Sprint's wireless phone service today even if it were free because it "has a coverage problem," though with additional spectrum from Dish it would be a great alternative to AT&T and Verizon.

He said several times that SoftBank is a formidable competitor -- "at the end of the day, they could have more fireower" -- so Dish may fail at its attempt to merge with Sprint. If it does fail, he would consider selling off Dish entirely, if he determines it would benefit shareholders.

Ergen also expressed support for a proposal by Sen. John McCain that could pave the way to de-bundling pay TV packages in favor of an a la carte approach. He said, though, that he doesn't suspect that McCain's bill, announced Thursday, will pass due to powerful cable TV lobbyists.

Email: Georg.Szalai@thr.com
Twitter: @georgszalai

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