Mortgage Crisis Causes DISH Network To Fall Off The Roof
DISH Networks Q2 profits were up. Unfortunately, 25,000 subscribers went missing. The company blamed the drop in subs on weak economic conditions, aggressive promotional offerings by their competition, the heavy marketing of HD service by their competition, the growth of fiber-based pay TV providers, signal theft and other forms of fraud, and operational inefficiencies at DISH Network - at least, that's what the 10-Q said.
This is the first time in history that either domestic satellite provider has posted negative subscriber growth so, as you can imagine, the stock got hammered. It was down about seven percent at this writing. I like their excuse. Times are tough. But, I don't think it's the whole story.
Verizon had an off quarter too. The company added just 176,000 new FiOS TV customers in the second quarter, down sharply from the first quarter when it added 263,000 new subs. And, additions to its FiOS high-speed Internet business were also off, the company added just 187,000 new customers in the second quarter, compared with 262,000 in the first quarter of 2008.
On the other hand, Comcast and Time Warner Cable both saw substantial increases in subs (over 200,000 each) in Q2.
What's really happening?
Well, DISH may have sailed into the Perfect Storm. A college student I know told me he and his buddies used DISH at school because they could cancel the service after three months and re-activate it under another roommate's name. They never paid a dollar for the service and held it for the entire school year. Inevitably, they'd re-up every September when they arrived back on campus. This is a pretty common trick and it surely contributes to the near 2.0% churn that DISH now experiences.
Then, there's the reality that DISH's service offering is very, very appealing to downmarket households that sit in the eye of the subprime mortgage crisis. The 2007 U.S. Foreclosure Market Report calculated 2,203,295 foreclosure filings on 1,285,873 properties nationwide, up 75 percent from 2006. 2007 was such a bad year for foreclosures that by December, there had been over 200,000 foreclosures every month for five months.
DISH Network has been trying to cope with the economic crisis by offering cheaper packages. In California, the state hit hardest by the subprime mortgage collapse, DISH offers 200 channels for only $29 a month, and even gives customers free hardware, free DVR, three months of free service and either a home theatre system or a free airline ticket. This may not be an evolutionarily stable strategy.
On the other hand, DISH may have a great deal of trouble attracting high end users who are more likely to need broadband service and are less likely be interested in DISH because of the lack of HD programming. While DISH plans to offer 100 national and 100 local channels of HD by the end of 2008, the transition is way overdue and may be too late to win any new subscribers.
As for cable competition: Is it possible that cable is offering a better broadband product that's easier to install and a better customer service experience than the telephone companies? Yes.
As for Verizon's issues: My friend Sal T., who is a very sophisticated VC, ordered FiOS for his home. Here is his entire email unabridged and unedited for your reading pleasure: "You need to lop FiOS customer service head's off. It completely and utterly sucks. The 800 number is a literal abyss. I have never experienced anything like it." I'm not sure everyone is as unhappy with Verizon's customer service as Sal is, but I have not heard anything positive from anyone.
As for that "other" satellite provider: Is it possible that DirecTV is doing a great job and providing a best practices product to customers who are interested in the benefits of satellite television? Yes. DirecTV announced solid second quarter numbers, with profit up 1.6 percent. CEO Chase Carey noted the company's expanded HD service as the reason for its steady growth. Unlike the DISH Network, DirecTV took in 129,000 new customers during the second quarter.
As for DISH: Is it possible that bottom-feeding is only a moderately successful business model in good economic times, and that the lowest end of the economic spectrum (who are hit the hardest) are the first to fall off the roof? No need to answer ... I just wanted to DISH.
Shelly Palmer is the host of MediaBytes a daily news show featuring news you can use about technology, media & entertainment, Managing Director of Advanced Media Ventures Group LLC and the author of Television Disrupted: The Transition from Network to Networked TV (2006, Focal Press). Shelly is also President of the National Academy of Television Arts & Sciences, NY (the organization that bestows the coveted Emmy® Awards). He is the Vice-Chairman of the National Academy of Media Arts & Sciences an organization dedicated to education and leadership in the areas of technology, media and entertainment. Palmer also oversees the Advanced Media Technology Emmy® Awards which honors outstanding achievements in the science and technology of advanced media. You can read Shelly's blog here. Shelly can be reached at shelly@palmer.net
Follow Shelly Palmer on Twitter: www.twitter.com/@shelly_palmer
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Yes, ditto on the fraud, deception, misleading of customers, etc. This company seems to think the best way to make money is to lie, cheat, and steal to outrageous extents. Did they not realize it would catch up with them and customers would leave as early as possible? Thank god it is finally catching up with them. It seems the company's CEO and board need to go, and they need to get people in there who try to make money as an honest business instead of through fraud and deception and turn this company's image around. I've never had any problems with any other company I've ever dealt with, except this one which is so over-the-top deceptive and fraudulant that it's just shocking and outrageous. Anyone who's dealt with them probably knows what I'm talking about. To find out more, visit the numerous consumer advocacy websites such as the rip-off report. The volume of complaints is unbelievable and they are all tied to the same Dish Network tactics: fraud and deception.
Yes, ditto on the fraud, deception, misleading of customers, etc. This company seems to think the best way to make money is to lie, cheat, and steal to outrageous extents. Did they not realize it would catch up with them and customers would leave as early as possible? Thank god it is finally catching up with them. It seems the company's CEO and board need to go, and they need to get people in there who try to make money as an honest business instead of through fraud and deception. I've never had any problems with any company I've ever dealt with, except this one which is so over-the-top deceptive and fraudulant that it's just shocking and outrageous. Anyone who's dealt with them probably knows what I'm talking about. To find out more, visit the numerous consumer advocacy websites such as the rip-off report. The volume of complaints is unbelievable and they are all tied to the same Dish Network tactics: fraud and deception.
Dish's biggest problem is misleading their customers. We were told we could get a DVR free. We asked if there would be extra charges and the woman said no. When it was said and done we were charged $300 plus more a year. No programming was added and it was not a one year charge, it was a perpetual charge.
We had been with Dish for probably 14 years. My husband and I liked our programming and took the top tier but no movies. I could change channels in the dark, I was so used to the remotes and where the programs were, but we changed because we kept feeling ripped off.
We got a month free for paying by the year. Then they decided to charge those who paid yearly for local programming. That really made us mad.
Once they tried to move the yearly date of renewal back to where we had to pay it earlier. We were told that there are really only 30 days in a month. We won that one.
Dish is losing customers that can read and think. They promised me a special deal for signing up, then proceded to bill me the full price every month. I called to complain, nothing happened. I finally had to get the Colorado BBB involved so I could be released from the contract they had me on. That doesn't include the 2 weeks I didn't have service (but was charged) when the box quit working and I had to wait for a replacement.
But not to worry, Comcast is just as bad...
You're missing the obvious: Dish's reverses in court that may eventually force them to deactivate their DVR's if further appeals and redesign strategoes eventually fail. I've been a satisfied Dish customer for ten years and will never go to DirecTV voluntarily, but I may be forced to eventually. I have to time-shift most of my favorite shows, and an external DVR is not a good solution for me.
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