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Dish Network Group (DISH)
Dish Network 1Q Profit Rises Despite Decline in Subscribers
Dish Network is apparently trying to please its shareholders and not its customers. The company has been consistently losing customers in record numbers over the last year, but continues to report an increase in revenue. This quarter was no different. The company reported on Monday that its first-quarter earnings rose 21% despite another drop in subscribers. Dish posted income of $312.7 million, or 70 cents a share, up from $258.6 million, or 58 cents a share, a year earlier. How can the company continue to report a profit after continuing to lose customers each quarter? How long will the company be able to maintain this growth in revenue?
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Over the last year, Dish Network has continued to report a decline in subscribers for four straight quarters. Dish has lost net subscribers as it struggles with operational and competitive issues, which prompted most analysts to lower their expectations. However, the company has been able to hold on to the number 2 spot as the biggest satellite provider behind DirectTV (DTV: Charts, News, Offers). During this most recent quarter, Dish Network lost 94,000 subscribers, which is a sharp contrast to DirectTV's acquisition of 460,000 new customers. Why is the company losing so many subscribers at this record rate? Dish said the subscriber loss was due to the weak economic environment, signal theft, and some problems in the company's customer service. The company also had a larger lower-income customer base and these individuals have been hurt the worst during this economic downturn. The company has not been able to provide the discounts and packages that consumers are searching for. As a result of this, consumers are moving to DirectTV or standard cable providers.
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So how exactly is Dish posting better-than-expected profits? Well it's a combination of a couple of factors. The company has been reworking its business strategy over the last year in an effort to compete with DirectTV and maintain its subscribers. The company was able to boost its net income by lower subscriber-acquisition costs in the quarter. Dish's total subscriber acquisition costs were $292.2 million for the first three months of 2009, down 22% versus $375.0 million in the first quarter 2008. The company also attributed the rise in revenue to an increase in equipment sales.
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Dish Network has to find a way to start adding back subscribers or revenue will almost certainly start getting much worse. Under the direction of its new senior management team, the company has started some initiatives to improve its subscribers. The company has been working with a number of different companies to replace the distribution deal that it once had with AT&T (T: Charts, News, Offers). The company feels that this is one of the big things preventing them from maintaining and acquiring new customers. Dish also reached an agreement with Univision Communications Inc. to deliver the company's Spanish-language programming, a niche that has shown viewer growth in the U.S. Hopefully, these various plans will help the company add some subscribers back.
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Dish has to definitely set and achieve aggressive goals to remain relevant in this competitive market. During these tough economic times, consumers are searching for the best deals and axing any service that will not make concessions. If the company continues to lose subscribers, they will definitely lose that number 2 spot and more money. Shares of the satellite provider rose 13% during Monday morning trading.
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Profile |
Click here to view a detailed profile of Dish Network Group.
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