Scott's Thoughts on Michael Neuman Leaving

[Scott Greczkowski]

Today I read the news that Michael Neuman has resigned as President and COO of Echostar Communications / Dish Network, I was in shock yet not surprised.

As we were getting ready for CES this year I was conversing with Charlie Ergen via email and Charlie kept on saying he wanted me to meet Michael Neuman.

Finally CES rolled around and I got to meet with Mr Neuman for about 30 minutes, and found him to be a breath of fresh air, this guy was to open and to honest to be a Echostar employee, he really seemed to care about what I had to say and immediately called over employees when I told him somethings that concerned me, without taking with anyone else for their optinions he made some decissions there and then. This impressed me very much.

After CES when I saw issues or when things we discussed were not happening like he told me they would I would contact Michael and immediately the problem would be corrected. I truely believe Michael was a true friend of SatelliteGuys.US.

Again when I read the news this morning I was saddened but not surprised, Michael Neuman was to open to honest and too caring, and that may have been a big reason of why he decided to go. (Thats TOTALLY speculation of course)

I thank him for the quick frendship we quickly formed and the help he has given SatellieGuys over the past few months. He will be missed. Wherever he lands next they will have a truely great person working for him.

Now assuming his role will be Carl Vogel and former president Michael Dugan. I don't know Mr Vogel well but I have had a few chances to talk with Michael Dugan including a nice meeting with him at CES where he told me he came back to the company because Charlie asked him to and he even stated that he didn't come back for the money. Michael Dugan is a true friend to Charlie and has been a longtime friend to forums such as ours. Lets hope this continues into the future.

 

[Indy]

Again when I read the news this morning I was saddened but not surprised, Michael Neuman was to open to honest and too caring, and that may have been a big reason of why he decided to go. (Thats TOTALLY speculation of course)

.

Boy, you got that right! Michael was the only one in the corporate office that was not a used car salesman in a previous life.

 

[Kindryck]

He probably got a call from The Audit Team.



Just kidding. Hope someone with his enthusiasm picks up where he left off.

 

[Juan]

Well does anybody know what E*"s fourth quarter number's looked like? I wonder if they were as pathetic as d*

 

[HDTVFanAtic]

According the USA Today article, Dish added 1,000,000 subs in 2005....as many subs as they had total in 1997.

Thats really all you need to know.

 

[waltinvt]

<snip>
As we were getting ready for CES this year I was conversing with Charlie Ergen via email and Charlie kept on saying he wanted me to meet Michael Neuman.

Finally CES rolled around and I got to meet with Mr Neuman for about 30 minutes, and found him to be a breath of fresh air, this guy was to open and to honest to be a Echostar employee, he really seemed to care about what I had to say and immediately called over employees when I told him somethings that concerned me, without taking with anyone else for their optinions he made some decissions there and then. This impressed me very much.

After CES when I saw issues or when things we discussed were not happening like he told me they would I would contact Michael and immediately the problem would be corrected. I truely believe Michael was a true friend of SatelliteGuys.US.<snip>

Obviously (from how you discribe things above)this came all of a sudden, which means something(s) happened over the last weeks that caused him to pull out. If's he's like you said, I suspect his concience made this decision. It would be great if he maintained contact with you Scott.

 

[navychop]

E* showed a net profit for the first 3 quarters of 2005. I don't see the 4th yet at cnn/money.

 

[Greg Bimson]

According the USA Today article, Dish added 1,000,000 subs in 2005....as many subs as they had total in 1997.

Thats really all you need to know.

No, we'd need to know more.

To answer juan's question, no, Dish Network has not released Q4 numbers.

Notice this trend...
2005 - about 1.1 million (assuming 300K in Q4)
2004 - about 1.48 million
2003 - about 1.25 million
2002 - about 1.35 million

This has been Dish Network's worst year in some time. And if it isn't 300K in Q4, it is even worse.

Conversely, DirecTV has this trend...
2005 - about 1.193 million (including the 200K net adds in Q4)
2004 - about 1.843 million
2003 - about 1.187 million
2002 - about 1.025 million

Both companies are struggling to hold on to their customers, as evidenced that neither company has had close to 300K net adds since Q1. DirecTV has even noted that their new signups are going down slightly, due to a better credit check. Couple that with higher churn amongst current subscribers, and the net adds start slowing more.

 

[waltinvt]

No, we'd need to know more.

To answer juan's question, no, Dish Network has not released Q4 numbers.

Notice this trend...
2005 - about 1.1 million (assuming 300K in Q4)
2004 - about 1.48 million
2003 - about 1.25 million
2002 - about 1.35 million

This has been Dish Network's worst year in some time. And if it isn't 300K in Q4, it is even worse.

Conversely, DirecTV has this trend...
2005 - about 1.193 million (including the 200K net adds in Q4)
2004 - about 1.843 million
2003 - about 1.187 million
2002 - about 1.025 million

Both companies are struggling to hold on to their customers, as evidenced that neither company has had close to 300K net adds since Q1. DirecTV has even noted that their new signups are going down slightly, due to a better credit check. Couple that with higher churn amongst current subscribers, and the net adds start slowing more.

Thanks Greg. Hey, maybe I just hadn't noticed them but haven't seen many posts from you - either here or there; anyway good to see you're around and hope you'll be active over here.
Walt

 

[Tom Bombadil]

They could be reaching a market saturation point. Or least a point where the "easier" sales have been made and now things get harder.

Between the two they are in the 27-28 million sub range. While the potential market for DBS is very high, there are a lot of people who don't want to fool around with dishes or for whom TV is just not that important and are satisfied with the ease of use from cable.

Services pass through stages like the early adopter stage, the high growth period of strong national advertising and coverage, then sustained growth of being an established provider, then you hit fiercer competition when your market share is large and growth is difficult.

DBS may be entering the stage of where growth rates are never going to be what they were. With cable offering more services, with FiOS popping up, and with having picked off a lot of the people who were willing to switch to using satellite dishes.

Look at the percentage of the growth rates you posted.

If Dish had roughly 7 million subs at the close of 2001, then they saw growth rates of:

2002: 19.3%
2003: 15.0%
2004: 15.4%
2005: 9.9%

And D*'s growth rate in 2005 is even lower, at around 7%.

So collectively there was significantly less growth in 2005.

If the days of double digit growth rates are over and DBS has entered a more mature stage of the product cycle, it will be interesting to see if they can sustain a profit over the long term.

 

[SummitAdvantageRetailer]

I guess with the latest trends, it's true that the satellite sales are declining.

Maybe with HD, both DISH and DirecTV can try to leverage their advantage over cable and win new customers that purchase new HDTV sets to come to satellite.

 

[Greg Bimson]

However, remember that DirecTV did add 935K in gross numbers for the quarter. With 735K churn, however, that is not good.

Now that DirecTV (and Dish Network) have all these customers, they need to find a way to stop the bleeding.

 

[navychop]

But DISH is still slowly but surely closing the gap in subscriber numbers with D*.

 

[Juan]

But DISH is still slowly but surely closing the gap in subscriber numbers with D*.

nope last 2 years its been widening

 

[Greg Bimson]

juan is correct. Over the past four years, DirecTV has outpaced Dish Network by 60,000 subscribers (this is assuming Dish Network's Q4 2005 is at 300K).

DirecTV has added 500,000 more subscribers than Dish Network over the past two years. Dish Network added 440,000 more subscribers over DirecTV in 2002 and 2003.

I'd expect the size of the gap to remain rather constant, until one of the companies has some kind of business anomoly.

 

[Tom Bombadil]

The churn rate is an increasingly significant factor to the overall growth rate.

As the total number of subs grow, the number of subs churning off also grows if your churn rate remains relatively constant.

A company with 5M subs and a quarterly churn rate of 1.6%, would lose 320,000 customers to churn each year.

A company with 15M subs and the same churn rate, will lose 960,000 to churn.

So the 15M company would need to add 640,000 more customers per year just to balance out the churn losses.

To show a 15% annual subscriber growth rate, the 5M company would need to attract 1,070,000 new customers - 320,000 lost.

The 15M company would have to attract 3,210,000 customers to show the same 15% growth rate.

It seems to me that neither D* or E* could hope to gain that many more customers. They would have to sign up over 5M customers this year between them to retain that growth rate.

So one of the strategies they may have to employ is to reduce the churn rate. During the period of explosive growth, they could lose this many customers and still do well. But if the new sub growth rate drops, then their overall net gain may depend upon customer retention.

For example, if D* signs up 1M subs but loses 800K to churn, then they have a very low growth of 200K subs. However if they had lost only 500K to churn, with the same number of new subs, then they gain 500K customers.

Add to this that as DBS has grown to nearly 28M subs, it becomes an increasingly large target for cable and broadband to go after, as they too want to grow their customer base.

Perhaps as the new sub growth rate declines, we will see both D* and E* paying more attention to keeping their existing subs happy.