Do The Math: EchoStar + DirecTV = 790K Subs.

[rtt2]

Do The Math: EchoStar + DirecTV = 790K Subs.
Byline: JAMES C. HELICKE

With EchoStar reporting a gain of 340K subs Tues, DBS has added 790K subs in 2Q. Cable lost about 312K basic subs during the same period. While seasonality and rate hikes influenced cable's losses, there's obviously much churn to DBS. "[Cable's] bounty programs [for DBS] are now at $500-$600, and they are still losing subs," the always opinionated Charlie Ergen pontificated. "Maybe they should pay $1K. Consumers are voting with their pocketbooks. I don't think as an industry we're as good as we're going to get." DISH's total revenue was up 26% to $1.78bln. Net income narrowed to $85mln from $129mln a year ago. The relatively solid Q set well with investors, as shares closed up 8.4%. The sub gains didn't come without a price, though. EchoStar shelled out $577/gross sub addition last Q, a 30% jump in subscriber acquisition cost (SAC) year-over- year. It's noteworthy that SAC dropped 5% vs 1Q '04, when it added 360K subs. Still, Smith Barney estimates that if you assume DISH bore no SAC on the 100K gross adds that came from its partnership with SBC, adjusted SAC hits a whopping $655. Then there's retention marketing and other related costs. Smith Barney estimates they rose about 10% to more than $140mln, well above the firm's $80mln estimate. -- Fightin' Words: While Ergen was very optimistic about DBS, calling it the "safer bet," he feels cable ain't dead yet. "You just don't think you're going to see the satellite industry get 800K subs in a Q without cable reacting," he said, pointing to VOD, broadband and telephony. "The big problem is that only about 1/3 of their customers have switched to digital. ... They are clearly on the defensive." -- Speaking Privately: DISH revealed it's authorized its board to repurchase up to $1bln in stock. Ergen didn't want to speculate about whether the move indicated EchoStar was considering going private. "We bought back a billion dollars of stock at prices that we thought undervalue our company long term," he said. "Cox is a different situation. They have a bunch of different divisions. It will be interesting to see how that plays out."

 

[Wayd Wolf]

Whether anyone likes it or not, the picture long term for DBS is not as bright as so many wish to believe.

1. The notion of career advancement by way of professional enrichment is completely nonexistant. While you can in cable achieve SCTE and NCTI certifications and mastery such that you may move to line work and head-end engineering, DBS has no such thing.

Contractors are of course going nowhere. Their largest aspiration in the near-term is to get a slightly higher rate per install; their goal for the mid-term is to sub out to men under them; and of course the long-term objective is to do anything but satellite and retire with any luck unmaimed.

Dish Network DNSC people are not any more brilliant and in fact are encouraged to know as little as possible to avoid paying them anything like a professional respectable wage and upward career mobility is not happening. Becoming management there is not to advance any more than going from shoe-shine boy to Al Bundy is.

2. Cable has far more bandwidth than DBS does. When the only way to add more to DBS is to add satellites, and customers already balk at going from a Dish 300 to Dish 500 because of a two inch size increase, you're not in for a pretty time.

DirecTV STILL uses a scheme by which no more than two satellites worth of programming can be put together. 110 is multiplexed with 119 to form one full bird with 101, remember. 00, 01, 10, 11... that is the binary way of expressing the possible switch states of DirecTV.

Dish Network may be able to includ fifty birds with their system, but name someone outside the DBS techie adopter segment who actually wants the holes for fifty dish masts in their house. Or who actually has the line of sight for all of them without taking a chainsaw to every tree for a half mile and explosives to their neighbors' houses.

In the world of Dish, name a few people who don't regard SuperDish as a pain in the behind. I have never met one tech yet who wants to do one. And why is Dish so braindead that they can't understand that if the majority line of sight failures are for inability to get 119, that 121 is even more likely to be a problem?

Cable meanwhile can push fiber deeper to serve fewer homes per node, can overbuild its own plants to throw on double the bandwidth if they like, as well as the best part of bringing fiber to the home, and serve high-speed Internet, telephony, VoIP, and video on demand that DBS cannot do.

When cable at least knows to ground in the first place and what is an acceptable ground in the second place while in my experience less than 30% of DBS installers know or care about either, when Dish Network can be one of the founding members of the SBCA but less than 10% of their DNSC people even know what the acronym is, when DirecTV can require SBCA NSTP certification but never bother to enforce it, and when cable can actually bother to supply their contractors with the installation materials while DBS makes their contractors purchase all of their own and thus encourage buying the cheapest and hence lowest quality they can get, DBS is not looking good.