Dish Adds 16,000 Pay TV Subs in Third Quarter, Excluding Hurricane Impact

Charlie Ergen - House Hearing - 2001
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"Linear TV is not dead," CEO Charlie Ergen told analysts as the satellite TV company continues to compete against YouTube, Hulu and other new digital players.

Dish Network on Thursday reported lower third-quarter financials and said it added 16,000 net pay TV subscribers in the 50 U.S. states in the period.

The company, though, also reported the one-time removal of 145,000 subscribers in Puerto Rico and the U.S. Virgin Islands as Hurricane Maria caused the loss of power there. When accounting for that and the 16,000 net additions in the 50 U.S. states, Dish's overall pay TV subscribers declined by 129,000 in the third quarter.

"In light of the situation in Puerto Rico and the U.S. Virgin Islands, Dish expects to incur certain expenses in connection with the re-activation of returning customers in these areas," the company said. "Accordingly, any returning customers will be recorded as gross new pay TV subscriber activations for the period in which they return."

But away from the impact of recent hurricanes, Dish president and CEO Charlie Ergen told analysts during an afternoon call that linear TV will continue to lose viewers to emerging Internet-based video services if the traditional pay TV industry doesn't improve its offering and reduce its commercial load.

"Linear TV is not dead. It's suffering declines in part because it's not as good a product. It's more expensive. Rates have gone up as viewership goes down. And the commercial load - you're talking about 30 percent of the viewing minutes are commercials. That's an unhealthy viewer experience," Ergen said.

"There's things as an industry we can do to change that. If the industry starts thinking of creative ways to compete, that market can stabilize," he added.

The satellite TV company lost 196,000 net pay TV subscribers in the second quarter and 116,000 in the third quarter last year. Macquarie Capital analyst Amy Yong had projected a subscriber loss of 48,000 in the latest period.

Ergen paid tribute to Disney for unveiling plans to launch two streaming services, one for family fare and another for ESPN, to kickstart a pay TV industry slow to respond to the OTT threat from entrants like Hulu, YouTube and DirecTV Now. "I felt like that we as an industry lost an entire generation of people in pay TV, and it was difficult until Disney made a courageous choice at the time to say we'll do OTT. Everyone else liked OTT, but not unless everyone else did it," he told analysts. 

As more OTT players compete, Ergen predicted an increasingly fragmented pay TV marketplace where consumers can shift between packages. "Not everyone has to be buy sports programming," he said of emerging OTT and skinny bundle offerings, unlike the traditional cable and satellite TV package where sports channels were likely to be included.

Dish in its earnings report once again included subscribers for its Sling TV streaming service, but didn't detail how many of those it added in the quarter or how many it had in total at the end of the third quarter. Dish ended September with 13.2 million pay TV subscribers.

Third-quarter earnings of $297 million, or 57 cents per share, compared with $318 million, or 67 cents per share, in the year-ago period. Quarterly revenue fell 5 percent to $3.58 billion, compared with $3.77 billion in the year-ago period. The financials came in slightly below Wall Street estimates.

Nov. 9, 2 p.m. Updated with comments by Dish CEO Charlie Ergen made on an analyst call.