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Video services

Sling TV Sputters in Q2

When you're doing bad, but not as bad as expected, you're actually doing sorta good. Welcome to today's pay-TV market.

If a pay-TV company loses a load of video subs, but not as many as Wall Street was expecting, it stands to be rewarded on the stock market.

A case in point is Dish Network LLC (Nasdaq: DISH). It lost 151,000 total video subs in Q2, close to expectations of -167,000. It shed 192,000 satellite TV subs in the quarter, much better than an expected loss of 235,000. Churn also improved to 1.46%, and was better than the expected 1.58%.

And as MoffettNathanson LLC analyst Craig Moffett explained in note today, steady subscriber erosion acquisition actually inflates EBITDA temporarily because it helps to sidestep some customer acquisition costs.

While Dish's core video business isn't gunning for glory these days, it apparently could be doing worse. As a result, Dish shares jumped almost 15% today, closing at $34.20 each.

Though Dish's satellite TV results were better than expected, Sling TV , the OTT TV service that's supposed to be helping Dish counteract satellite TV subscriber erosion, had an off-quarter. Sling TV added just 41,000 subs, short of an expected gain of 68,000, and well off the 120,000 subs it added in the year-ago quarter. Dish ended the period with 12.99 million US pay-TV subs (10.65 million satellite TV subs, and 2.34 million Sling TV customers).

Launched in February 2015, Sling TV was early to the OTT game when the cord-cutting phenomenon was not as pronounced. It now faces lots more competition with the rise of DirecTV Now, Hulu's live TV service, YouTube TV, fuboTV, Philo and PlayStation Vue.

But sputtering growth at Sling TV is bad, right? Well, maybe not. Moffett believes that slower sub growth at Sling TV, a no-contract service with razor-thin margins, is hardly worth a shoulder shrug in the grander scheme.

"While this deceleration will likely get a fair amount of attention -- Sling was once hailed as Dish's Pay TV future -- it simply isn't terribly important for the long term," Moffett wrote. "These subscribers have never been profitable, so whether Dish adds a lot or just a few, or begins to lose the ones it already has, just doesn't matter very much."

Dish, of course, is a bit more optimistic about Sling TV's longer-term prospects, noting that ARPU is up as subs took higher-priced packages and coupled with more ad dollars and revenue add-ons like Sling TV's relatively new cloud DVR service.

With Sling TV's focus on skinny bundles, "we think we're onto something good," Warren Schlichting, EVP and group president at Sling TV, said on today's call. "We've always said that competition is good for the category…There's been a little bit of a slowdown in growth, but we think we're well-positioned and well-poised."

— Jeff Baumgartner, Senior Editor, Light Reading

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