Dish Network’s major cutbacks saved it from ending the year on another loss-making note, with the US operator reporting profit of $343 million for the fourth quarter of 2016, despite a quarterly revenue drop of $22 million – marking a turnaround from the $125 million net loss a year earlier.
Dish was up to its usual tricks of covering up its poor pay TV numbers behind the uptake of subscribers to its OTT streaming service Sling TV. It reported 694,000 new pay TV subscribers in Q4, a quarterly net gain of 28,000. However, as we are used to pointing out, the majority of these activations will be for the less profitable Sling TV, and the bulk of cancellations will be for its satellite pay TV service.
Clearly Dish is not alone in these clever tactics of concealing pay TV losses, and who can blame the operators for wanting to please their investors, but it was wholly refreshing when AT&T became the only US operator to break out figures separately for its DirecTV Now service. We therefore challenge the SEC to finally take a stand here and put an end to what is essentially the practice of deceiving investors.
As a result of subscriber migration from expensive satellite services to cheaper OTT video, Dish Network’s revenues for the fourth quarter slipped to $3.72 billion, down from $3.75 billion in the previous quarter, but full year 2016 revenue came in slightly up at $15.09 billion, growing 0.2% from the end of 2015.
The fact that Dish Network’s net income turnaround was significantly helped by slashing 2,000 jobs in 2016, leaving it with 16,000 employees today, seems to have gone completely unnoticed. The company is a notoriously ruthless employer, and the layoffs are likely to continue throughout the coming year(s).
Sling TV has an estimated run rate of 150,000 subscribers a quarter, giving it a ballpark subscriber figure for the end of 2016 of between 900,000 to 1 million. Dish ended the year with a total of 13.67 million pay TV subscribers, including those on Sling TV, a year-on-year net loss of 392,000 subscribers in 2016. Taking into account Sling TV subscriber estimates, this puts Dish’s actual satellite pay TV figures at a fraction over 12.7 million.
Given that Dish had 13.98 million pay TV subscribers as of December 2014, two months before Sling TV launched, that’s a quite staggering satellite subscriber loss of almost 1.3 million in 2 years.
Dish gives a couple of tiny hints to admitting that its subscriber base is cutting the cord in favor of Sling TV, hidden away in its 10K filing this week, with one stating: “prior to 2015, we launched our Sling International video programming service, which historically represented a small percentage of our pay TV subscribers.” Historically being the key word here.
Another statement concedes: “subscriber churn may increase with respect to subscribers who purchase our lower tier programming packages and who may be more sensitive to economic weakness, including, among others, our pay-in-advance subscribers.”
Another milestone for Dish Network in its final year 2016 report is that its average monthly subscriber churn rate rose to 1.83% for 2016, up from 1.71% from 2015 – a 0.24% rise in just 2 years which sets Dish Network up to hit a 2% churn rate before 2018.
Dish took control of 100% of the Sling TV operation at the start of this month following a deal to snatch a set of assets from its set top and satellite services sister company EchoStar, which included its 10% stake in the streaming service and key OTT technologies.
This deal represents Dish taking a significant step towards prioritizing OTT, and could even suggest that it is preparing itself for a potential merger – with T-Mobile US heavily rumored to be a merger partner. Although it has been suggested that T-Mobile US could target the takeover of a smaller pay TV provider, which could be triggered by Verizon doing the same.
Broadband subscribers came in at an annual loss of 43,000 to leave Dish with 580,000 at the end of 2016.
Dish also ended the year with a debt pile of $17.15 billion, growing from $15.53 billion in the previous quarter, contributing to total liabilities of $28.09 billion.