Dish Network Lost 135,000 Subscribers in Second Quarter

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Quarterly financials improved, but after last week's gain of 26,000 video users by DirecTV, the customer loss by Charlie Ergen's company makes the first-ever quarterly subscriber decline for U.S. satellite TV providers official.

NEW YORK - Charlie Ergen's Dish Network reported stronger second-quarter financials on Tuesday, but the satellite TV provider said it lost about 135,000 subscribers in the latest period, more than the 31,000 that Wall Street had expected on average. It cited increased competition for the bigger drop in customers.

Satellite TV competitor DirecTV last week reported a weaker-than-expected 26,000 subscriber gain in the seasonally slow second quarter. As predicted by more and more industry observers, Dish's decline means that the U.S. satellite TV industry lost subscribers for the first time ever in the second quarter. It also drags down the overall quarterly subscriber momentum for pay TV operators further after several cable operators had already disappointed Wall Street expectations.

Dish ended June with approximately 14.06 million total subscribers. It had lost 19,000 subs in the second quarter of 2010.

Dish reported a second-quarter profit of $335 million, up 30.3 percent from the year-ago period.

 Revenue rose 13.3 percent to $3.6 billion.

New Dish president and CEO Joe Clayton lauded "another quarter of strong growth" in revenue and the bottom line. "Our decrease in net subscribers was primarily due to increased competitive pressures, including higher levels of discounting," he said. DIrecTV had also mentioned competition and a weak economy as key drivers of its weak customer gains.

"The second quarter was also marked by several other achievements including our purchase of most of the Blockbuster assets, settlement of the TiVo litigation and renewal of a multi-year partnership with Frontier Communications, offering Dish Network's digital TV entertainment to Frontier's nearly 4 million customers in 27 states," said Clayton. "As we look forward to the second half of the year, we will focus on commercializing our technology, re-energizing our distribution channels and strengthening our brand image. We continue to offer the best value to consumers with the lowest everyday prices, in part by freezing prices through January 2013."

Wells Fargo analyst Marci Ryvicker said the weaker subscriber momentum is no surprise amid increasing costs to acquire subscribers. "While net adds were weak, it makes sense - just look at subscriber acquisition cost, which is approaching $800," she wrote in a first report.

Evercore Partners analyst Bryan Kraft said Blockbuster revenue in the latest quarter appeared to be $254 million, with operating cash flow of $23 million.


Twitter: @georgszalai

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