January 10, 2012 5:00 pm

Dish bids to stem subscriber decline

Dish Networks has unveiled a suite of new products and refreshed branding as it attempts to stem a sharp decline in subscribers who have abandoned the satellite television provider due to superior offerings from competitor DirecTV and cable operators such as Comcast.

Joe Clayton, chief executive of Dish, the US’s third-largest satellite provider with 14m subscribers, said he aimed to transform the company’s “cheap” image to that of a premium products provider.

“We’re trying to change the image of the company,” said Mr Clayton ahead of the company’s presentation at the Consumer Electronics Show. “The weakness that our company has had over the last couple of years is in our communication to the public. In the past our image has been one about cheap, cheap, cheap. We’re more than that.”

As part of these efforts, Dish has unveiled a high-definition digital video recording system that it says is among the most advanced in the industry. The Hopper system will be accompanied by smaller Joey boxes, using the Australian term for kangaroo, which will deliver Dish services to multiple televisions in a single home.

Yet it will take more than savvy marketing and products to lure back customers, and analysts remain unconvinced. Dish lost 111,000 customers in the third quarter, and 134,000 in the quarter before that. But the company has managed to increase revenue per user, boosting third-quarter revenues to $3.6bn and net income to $319m, both up from the same time a year earlier.

Benjamin Swinburne, analyst for Morgan Stanley, remains sceptical about Dish’s ability to win back customers as it faces stiff competition in the “increasingly difficult” US pay-television sector where “over time, we expect slow but steady [subscriber] declines”.

Other Dish offerings designed to entice consumers include free SiriusXM radio stations through Dish devices, and expanded access to HBO content. But these features will be costly for Dish, and Mr Clayton warned they may be passed on to the consumer in the form of higher rates.

“Like every other pay-TV provider, we’re concerned about the programming costs,” he said, pointing to NBC’s $4.83bn bid for the Olympics. “Who knows how much of that will be passed on. It will get to a point of diminishing returns.”

Mr Swinburne pointed to Dish’s unused wireless spectrum as a valuable asset whose worth increased sharply after Verizon’s $3.6bn acquisition of the SpectrumCo assets last month. Mr Swinburne said Dish’s spectrum could be worth as much as $8.5bn, compared with the $2.8bn Dish paid for it last year.

Dish is also looking to leverage its $320m acquisition of the failed Blockbuster video rental chain last year by offering it as a streaming video service for $10 per month, to compete with Netflix’s $8 a month service. “Blockbuster is somewhat tainted, according to Wall Street,” Mr Clayton said. “But consumers still use it.”

Mr Clayton’s hope is that Dish’s technology platform, along with some services, will stop customer losses. “We have a long history of being first in technical innovation,” he said. “The problem is that we never told anybody.”

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