Don't Fear the Hopper: Dish Loses More TV Customers Than a Year Earlier

Broadcasters Hate Dish's Hopper DVR

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Dish Network and Charter Communications have posted second-quarter results hurt by video-subscriber losses and programming costs.

Dish's Hopper is meant to help attract subscribers
Dish's Hopper is meant to help attract subscribers

Dish Network, the third-largest pay-TV company by customers, and Charter, the eighth-biggest, both may look to combine with competitors as a way to gain leverage in negotiations with TV networks to carry their programming, according to Paul Sweeney, an analyst at Bloomberg Industries. Both companies reported second-quarter losses today.

"The logic seems to be that challenging subscriber trends only highlight the need for consolidation to drive down costs in a mature industry," Mr. Sweeney said.

Dish's most likely partner is DirecTV, the second-largest pay-TV company and biggest satellite-TV provider, said Jaison Blair, an analyst at Telsey Advisory Group in New York.

DirecTV CEO Mike White said last week combining with his company would make sense. "Further industry consolidation does make sense to help address what I think are unsustainable cost increases for the average customer," he said.

Time Warner Cable has blacked out CBS in New York, Los Angeles and Dallas in a dispute over fees and digital streaming rights considered necessary to keep cable competitive with cheaper streaming services such as Netflix. Dish has tried to attract customers with its Hopper DVR, which among other things makes it easy to automatically skip many commercials. Broadcast networks have sued to halt the service.

But the company lost about 78,000 customers in the quarter, more than the 37,000 average decline estimated by 11 analysts surveyed by Bloomberg. It's also well above the 10,000 customers lost in the second quarter of 2012.

Dish's net loss was $11 million, or 2 cents a share, compared with net income of $226 million, or 50 cents, a year earlier, the company said today in a statement.

Charter, meanwhile, lost 48,000 residential video customers, a larger decline than the 36,000 average estimate of six analysts surveyed by Bloomberg but a smaller drop than the 66,000 it lost in the quarter a year earlier. Charter's net loss widened to $96 million, or 96 cents a share, from $83 million, or 84 cents, a year earlier, the company said in a statement. Charter gained 40,000 broadband internet subscribers, more than the 33,000 average analyst projection.

The company studying mergers with larger cable providers, according to people familiar with the matter.

John Malone's Liberty Media Corp., which owns 27% of Charter, is pushing the company to pursue an acquisition of Time Warner Cable or a combination with Cox Communications , the fourth- and seventh-largest pay-TV companies, the people said.

"Our big opportunity is to take advantage of our inherent strengths and grow our share," Charter Chief Executive Officer Tom Rutledge said during today's earnings conference call. "In terms of timing of M&A, I think Charter can be extremely successful without it and potentially with the right deal be even more successful."

Charter executives said they wouldn't discuss any specific transactions. Dish's conference call on earnings is scheduled for noon New York time today.

"There would be tremendous synergies with DirecTV," Dish Chairman Charlie Ergen said on a May 9 conference call. "You still would have to ultimately figure out how to transform that company long-term, in my opinion, because the video business is mature and ultimately it will go into a decline phase."

~ Bloomberg News ~

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