Dish Returns to Pay TV Sub Growth in Fourth Quarter With 28,000 Net Adds

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Charlie Ergen

The satellite TV company, led by Charlie Ergen, exceeds earnings expectations, but revenue comes in below estimates.

Dish Network on Wednesday said it swung to better-than-expected fourth-quarter earnings as it returned to growing its pay TV subscribers for a quarter for the first time in a while.

It had lost TV subscribers on a net basis for all the other quarters of 2016 and closed the full year with a lower sub count. 

The satellite TV company, led by Charlie Ergen, added 28,000 net pay TV subscribers in the quarter to end it with more than 13.67 million. In the year-ago quarter, the company had lost 12,000 net subscribers, and in the third quarter of 2016, it had lost 116,000, its biggest quarterly drop ever.

Dish in its earnings report once again included subscribers for its Sling TV streaming service, but didn't detail how many of those it had recorded in the quarter or how many it had in total at the end of December.

"For programmers, maybe it matters. But for Dish itself, it is utterly meaningless," MoffettNathanson analyst Craig Moffett tells THR when asked about the development. "All that matters is the split between satellite and [Sling] OTT [subscribers]. Reporting them together implicitly suggests that the two are somehow the same. They are not. Satellite customers are high value, while OTT subscribers are very low value."

But Ergen during an afternoon analyst call insisted Sling TV, and new rivals like PlayStation Vue and DirecTV Now, were going well beyond targeting cord cutters and cord nevers to becoming alternatives to traditional cable and satellite TV packages.

"It may not be my first preference, but I think OTT is becoming a direct replacement for cable and satellite," Ergen argued. To stem the tide against linear TV, he urged programmers to stop raising subscription prices and stuffing content with commercial air-time, and to mimic Netflix and become live, linear Internet TV services.

"You have to make linear TV look more like an OTT product. They (consumers) like Netflix because you can watch ad-free and binge-view. It would be relatively easy to duplicate some of that," he told analysts. "At least at Dish Network, we can make our linear product more consumer friendly and take the benefits of OTT and integrate that. We can technically do that," Ergen added.

Dish's earnings for the fourth quarter reached $343 million, or 70 cents per share, compared with a loss of $125 million, or 27 cents per share, in the year-ago period. Revenue declined from $3.78 billion to $3.72 billion, coming in below analysts' expectations.

Etan Vlessing in Toronto contributed to this report.

Feb. 22, 1 p.m. Updated with comments by Charlie Ergen made during an analyst call.