Dish Sheds Subs, Changes Up CEO

Proving that cable operators aren't the only pay-TV providers hemorrhaging video subscribers these days, Dish Network lost a sizable number of video customers in both the final quarter of 2014 and the full year.

Dish Network LLC (Nasdaq: DISH), the second-biggest US satellite TV provider, reported Monday that it shed 63,000 video customers in the fall quarter, a reversal from its modest gain of 8,000 in the year-ago period, as it fought nasty carriage duels with three major TV programmers -- CBS Corp. (NYSE: CBS), Fox News and Turner Networks. The blowups led to blackouts of the networks on Dish's programming line-up, prompting a number of subscribers to shift to rival DirecTV Group Inc. (NYSE: DTV), cable or other pay-TV options, or to simply cut the subscription video cord.

Due largely to this year-ending slump, Dish dropped 79,000 video subscribers for the full year, down from a very slight gain of 1,000 in 2013. As a result, its total video customer count slipped below the 14 million mark again, as its customer churn rate climbed and its gross subscriber additions fell.

Dish -- which dramatically seized the spotlight with its launch of the Sling TV over-the-top video service and its more than $13 billion bid for AWS-3 spectrum licenses in the past month -- also said farewell to its latest CEO Monday. The company announced that Joseph Clayton, the consumer electronics industry veteran who has headed Dish for the last four years and led the creation of Sling TV, will retire at the end of March. Not surprisingly, Dish Chairman and Co-Founder Charlie Ergen, who has never strayed far from the action, will step back in as CEO. (See Hey Big Spenders! AT&T, Dish & VZ Splash Cash on Spectrum and T-Mobile: Google & Dish Could Be 'Interesting' Partners.)

On the company's quarterly conference call with financial analysts and the press Monday afternoon, Ergen said the timing seemed right for him to take over the CEO duties of Dish once more for an indefinite period. "With Joe leaving, I thought it was a good chance to get back into the day-to-day operations," he said. "I certainly will stay on as CEO until I can find somebody better."

Ergen conceded that the carriage battles with CBS, Fox and Turner and corresponding network blackouts have "all had negative impacts" on Dish "in the short term." But he said his company had to "balance the short-term negative with the long-term risk of paying too much for programming."

At the same time, Ergen sounded eager to avoid another nasty license renewal battle when asked about Dish's current contract negotiations with another major programmer, Viacom Inc. (NYSE: VIA) "Viacom is one of our better relationships," he said. "We would be hopeful that we will continue to be working for a long time with Viacom, as we have for the last 20 years."

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With Dish basically treading water on video subscriber growth for the past few years, company executives have increasingly focused on the wireless business for future gains. As he has before, Ergen portrayed Sling TV as part of that long-term wireless strategy, describing the new OTT service as a way to "distribute video on a more mobile basis, on a wireless basis, because that's the way the next generation is going to watch television."

But Ergen pooh-poohed the widely held notion that Sling TV could be very disruptive to the current pay-TV landscape. Referring to it an "incremental business" for Dish, he argued that the forthcoming OTT service from Sony Corp. of America could be "a lot more disruptive" because the service will be "a much more comprehensive product" from a major new pay-TV provider.

Peppered with questions about the recent AWS-3 spectrum auctions, Ergen brushed off accusations by AT&T Inc. (NYSE: T) and other spectrum rivals that Dish took unfair advantage of loopholes in the Federal Communications Commission (FCC) 's rules and created artificial demand for the licenses. "We went by the rules that were approved unanimously by the FCC commissioners and were commented on publicly," he said. "It's just competition and not everybody wants competition."

— Alan Breznick, Cable/Video Practice Leader, Light Reading

kq4ym 2/25/2015 | 9:40:04 AM
Re: Dish and Dish Sling While I've not been a Dish subscriber, I did cancel my Directv several years ago, electing to go over the air, and then add a Roku box. The monthy saving were more than worth it for me as I rarely watched most of the channels on satellite tv. I suspect that's the big problem, and why folks are leaving that arena. But 14 million more or less subscribers is still a large chunk of change. Losing a few dozen thousand subscribers probably isn't going to make much immediate difference.
jwils5396 2/24/2015 | 1:27:14 PM
Dish and Dish Sling First of all, I have been bitten by Dish dishonestly and poor customer service twice over the years. There will not be a third time.

Second, Sling TV utalizes streaming service and streaming will eventually surplant cable and sattelite service. But to be truly effective and successful, it will have to be an ala carte service, not the 'I will tell you what you can watch" service offered by Dish Sling. After all, three times last year Dish screwed over it's customers by changing programming package content. Why do they think we can trust them now?
jabailo 2/24/2015 | 12:52:22 PM
Why A Dish? I see the utility of having a dish from a satellite from downlink from the network infrastructure side (not gumming up trunk lines) but from the consumer side, if he is already paying for Internet with high bandwidth (and in Seattle CenturyLink is rolling out 1Gpbs) you could ask why each residence needs a Dish.  That said, the purchase of DirecTV by AT*T makes sense not just because of the subscriber list, but also because that satellite network might better serve as a midrange connector.  Imagine a dish not on homes, but at a local neighborhood receiving station, leaving the last miles to fiber or even LTE.

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