Sling TV Soars at Dish's Expense
Maybe Dish Network should just get it over with and shift all of its satellite TV subscribers over to Sling TV already.
Continuing a painful process set in motion three years ago with the launch of its Sling TV OTT video service, Dish Network LLC (Nasdaq: DISH) reported Wednesday that Sling TV scored more subscriber gains at the expense of Dish's core satellite TV service in the fourth quarter. The company also reported another sharp drop in revenue because Sling TV subscribers pay much less for their OTT skinny bundles than legacy Dish subs shell out for their full-sized satellite-TV packages.
Releasing its Sling TV sub numbers for the first time, Dish said its OTT service topped 2 million subscribers at the end of last year, reaching a total of 2.2 million. That represents a gain of about 160,000 subs in the fourth quarter, enabling Dish to report an overall customer gain of 39,000 for the period.
But, at the same time, Dish's satellite TV service closed out 2017 with just over 11 million customers, its lowest total in decades, as more of its legacy subs keep switching over to Sling TV. The satellite service shed 121,000 subscribers in the fourth quarter and that loss would have been even higher if not for the 75,000 subs that Dish reconnected in Puerto Rico and the US Virgin Islands as part of the recovery from last year's hurricanes.
As a result, Sling TV now accounts for about one sixth of Dish's total sub count of 13.2 million, up from zilch just three years ago. While that’s good news for Dish’s prospects in the still-expanding OTT video market, where it joins such other services as HBO Now, CBS All Access and Showtime at the 2 million-plus-sub level, it's bad news for the company's bottom line. That's because skinny bundle subscriptions with their low price points generate much lower revenue than satellite TV subscriptions and are only marginally profitable at best.
This tradeoff is reflected in Dish’s latest earnings report. The company said revenue fell to $3.48 billion, down 7.2% from $3.75 billion in the previous year. While net income shot up to $1.39 billion from $355 million in the prior year, that was almost entirely due to a $1.2 billion tax break from the big recent US corporate tax cut.
For the full year, Dish reported its revenue slid 5.4% to $14.39 billion, compared to $15.21 billion in 2016. Net income rose to $2.1 billion, up from $1.5 billion in 2016, again mainly because of the corporate tax cut.
In trading Wednesday, Dish's stock price fell to $43.18 a share, down about 3.1% on the day.
— Alan Breznick, Cable/Video Practice Leader, Light Reading