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12 May 2022

Dish Network defying financial odds, despite churning TV subs for fun

Only AT&T and Comcast lost more pay TV subscribers in Q1 2022 than Dish Network’s 462,000. Of course, Dish’s damage is split across two video products – the Dish TV satellite offering and the streaming service Sling TV – making the losses of 228,000 on Dish TV and 234,000 on Sling TV appear trivial when split, compared to Comcast’s 484,000 and AT&T’s 620,000.

While last week’s pay TV analysis from Faultline highlighted how Comcast’s cable video revenue for the quarter was relatively stable, at a loss of just 1.5% to $5.54 billion, Dish Network’s pay TV revenue looks even more remarkable, all things considering. The satellite TV operator saw Q1 2022 revenue fall just 1.1% to $3.13 billion, with a positive operating income of $752 million, despite having almost half a million fewer customers.

Looking at the wireless business for comparison, where Dish Network is channeling increasing focus and capex, revenue sunk 9.5% year on year to $954.4 million, at an operating loss of $201.7 million.

Worse, it lost another 343,000 mobile subscribers, bringing the total down to 8.2 million, on the eve of its 5G network expansion, with Dish having just five weeks left to meet the FCC’s construction deadlines. Headlines paint a very different picture.

Our point is that, somehow, select US pay TV heavyweights are weathering the cord cutting storm, as sustained subscriber losses fail to reflect on finances. ARPU is helping here in a significant way, with Dish Network’s average pay TV subscriber paying almost $11 more today compared to two years ago – rising to $99.44 as of Q1 2022 across both Dish TV and Sling TV.

ARPU breaching the $100 a month barrier across both Dish TV and Sling TV is almost unthinkable, given the wealth of cheaper streaming alternatives on the market today.

But with the average US household stacking four OTT video services, and many signing up to five or more video streaming offerings, many of Dish’s remaining 10.25 million pay TV subscribers (7.99 million Dish TV; 2.25 million Sling TV) are happy to pay a little extra for everything all in one place, with live TV as the focal point.

Dish’s wins in ARPU and resultantly revenues could therefore be interpreted as a content aggregation success story, and a testament to some of the newer advancements to its flagship fleet of Hopper DVRs, such as betting features and the Android TV Hopper Plus platform, which landed recently.

The Android TV-based platform features the ad-skipping functionality that is a trademark of the Hopper set tops, and Dish is marketing the Android TV version as a more of a “whole home” experience compared to a home that might have a Roku in one room and a Chromecast or a Fios TV from Verizon in another room.

Hopping ads continues to be a strong strategy for Dish’s TV business because, apparently, the biggest complaint the operator receives for linear TV is having to sit through some 15 minutes of commercials per hour of TV. We find it hard to believe that Dish Network’s call centers are stacked with queues of disgruntled ad viewers, over those complaining about subscription fee increases, billing problems, or technical issues.

Speaking during the company’s earnings call, Dish Network’s decisionmakers discussed “feeling around” the market to figure out how it can continue to improve the user experience of its video offerings while accepting that advertising makes a lot of money.

Co-founder and Chairman Charlie Ergen believes the video business will be “very profitable” going forwards. Playing devil’s advocate, we would argue that Dish Network has no right to be celebrating any successes given its monstrous video subscriber churn rate, although – as we said – the finances look surprisingly strong.

Churn has accelerated since the height of the pandemic, when pay TV operators enjoyed relatively low rates of subscriber turnover compared to trends of previous years. That period of respite is over, one that Dish management believe provided valuable time to concentrate on retaining the right type of customer and – most importantly – ensuring that these select customers are profitable.

The operator acknowledges that TV bills are too high, but at the same time consumers are willing to pay for the thrill, reliability, and convenience of live TV. This ties into Dish’s strategy of targeting more rural customers, which it has been pushing since around 2016, so nothing new here, but there are signs of this paying off.

Dish is still not willing to disclose its rural penetration, but does at least acknowledge publicly that the majority of its TV customers are situated in rural areas of the US.

Meanwhile, the conversation around Dish Network’s merger with DirecTV is not going away. Ergen continues to describe a coming together of the two businesses as “inevitable”.