The subscriber losses continue to pile up for Dish Network's core satellite TV business, more than offsetting any gains for its newer Sling TV OTT service.
In its latest earnings release Wednesday, Dish Network LLC (Nasdaq: DISH) reported that it shed 116,000 overall pay-TV customers in the third quarter, compared to just 23,000 a year earlier. The total subscriber loss, the sixth straight quarter drop for Dish, came despite strong estimated gains for Sling TV as the company's traditional satellite TV business continues to crater. The company still counts both satellite TV and OTT subscribers together.
Dish, which lost a staggering 281,000 pay-TV subscribers in the second quarter, has now shed 420,000 total video subs through the first three quarters of the year. Worse yet, as estimated by MoffettNathanson LLC , the company lost 320,000 legacy satellite TV customers in the summer period, about even with its second-quarter performance, resulting in its worst third quarter yet. And over the past 12 months, MoffettNathanson reckons that Dish has now lost a whopping 949,000 satellite TV subs, or more than 8% of its legacy pay-TV customer base. (See Is Dish Going Down the Drain?)
Moreover, Dish reported that the overall monthly churn rate for its video business climbed to 2.11%, its worst rate ever. That rate is up from 1.86% a year earlier.
On the brighter side for Dish, MoffettNathanson estimates that Sling TV netted 204,000 subscribers in the third quarter, up from 155,000 additions a year ago. As a result, the company has now added 517,000 OTT subs over the past 12 months, boosting its total to nearly 1.1 million.
But now Dish faces the prospect of Sling TV competing against new skinny-bundle, or at least skinnier-bundle, OTT services from such video powerhouses as YouTube Inc. , Hulu LLC and AT&T Inc. (NYSE: T), as well as such existing players as Sony Corp. (NYSE: SNE). In particular, AT&T's DirecTV Now service, set to launch later this month, poses a serious competitive threat. DirecTV Now plans to offer about 100 channels for $35 a month, as opposed to Sling TV's basic 20-channel package for $20 a month.
"AT&T's planned $35 DirecTV Now service appears poised to strike right at the heart of Sling TV, which has been the sole glimmer of growth in Dish's core business," Craig Moffett, principal analyst at MoffettNathanson, wrote in a note to investors yesterday. "We've always speculated that Sling TV subscribers are likely more price-sensitive than average and therefore more inclined to churn if a better deal comes along. We're about to find out if we were right."
In their conference call with analysts late Wednesday, Dish executives insisted that they're not that concerned about DirecTV Now, at least not yet. That's because they see AT&T targeting the traditional pay-TV audience with DirecTV Now, instead of the more price-sensitive cord-cutters and cord-nevers that Dish has been pursuing with Sling TV.
"It sounds like it'll be a pretty full bundle with 100 channels that I would expect would go after the traditional pay-TV ecosystem and maybe something like Sony Vue, which is also a bigger bundle," said Roger Lynch, CEO of Sling TV . "Our strategy was never to re-create that big bundle, it was to create a lot more consumer choice."
Dish officials also contended that DirecTV Now's debut could spur more growth for Sling TV by expanding the OTT video market further. "I think that OTT in general has the potential to be as big or bigger than the DBS business, right?" said Dish Chairman & CEO Charlie Ergen. "It's the next way to watch live TV, right?"
Dish reported third-quarter revenue of $3.75 billion, up a touch from $3.73 billion a year ago. The company's net income totaled $307 million, up from $196 million a year earlier. In early morning trading, Dish's stock price fell to $56.39 a share, down about 2.7%.
— Alan Breznick, Cable/Video Practice Leader, Light Reading