DISH: Where have all the subscribers gone?

Erik Keith, senior analyst of Broadband Infrastructure at Current Analysis, believes that this HD roadmap could prove to be what sustains satellite providers going forward, even more so than the bundle. He, too, didn’t see Dish’s sub loss as a cause for concern.

“I think the churn for Dish is because they are losing the marketing race this last quarter,” Keith said. “Whether they can grab some momentum back or regain lost momentum over the next couple quarters, we’ll see. The 1080p angle, and HD line up and MPEG-4 will probably help them a bit. It depends on how deep the consumer wants to get into the details. The main thing they’ll look at again is if the HD channel lineup is superior to that of U-Verse or whatever the other options are locally. And of course price.”

Satellite HD offerings may help the individual providers, but some are willing to bet they won’t want to go it alone. According to Wall Street Journal reports today, Dish and DirecTV might be revisiting the merger they attempted back in 2001. Although unsuccessful at the time due to regulatory opposition, it may be a more viable option following Dish’s dismal second quarter. Mastrangelo thought a more likely scenario was the satellite provider being bought out by another company, but she didn’t see a merger in the cards. Keith, on the other hand, thinks it may be the most viable option.
“Satellite will always be a viable option for customers, but the difference is maybe Dish and DirecTV end up merging like satellite radio are,” Keith said. “Ultimately the FCC can say as long as there are other competitors, it doesn’t matter what type of system they’re using – cable or telco – as long as it’s a real option for the customer. If there’s one satellite company left, the government might allow that.”

Regardless of what move it makes, as Ergen pointed out in its earnings, Dish is stuck between attempting to reduce churn without significantly increasing its spending on customer retention incentives, which negatively effect earnings and free cash flow. Its cable and telco competitors likely won’t stand by as Dish ramps up its HD lineup and focuses on adding satellite, but at this point, it may be too soon to blame them for the satellite provider’s recent loss.

“Everyone is looking for that bullet,” Mastrangelo said. “It is great press for the telcos to convince themselves that what they are doing is having an impact on the satellite operators, but I don’t think I could make a statement right now in good faith. It is just too early to say they are having a direct impact. The bundles of service that can be offered by them and cable has had some impact combined with the housing market.”