Dish Network Starts Falling to Earth

[DKSat]

Media July 24, 2008

The satellite TV network is struggling to keep subscribers from fleeing. But it could be too late.

Not long ago, Charlie Ergen was the scourge of cable TV. By offering bargain prices and competing head-on with struggling cable operators, his Dish Network satellite company snatched away millions of subscribers and nearly caught up with its bigger rival, DirecTV . Now, Dish is losing altitude faster than a dying satellite, and Ergen is looking like an also-ran.

Ergen declined to comment, but not much is going right these days. Having added fewer subscribers than analysts projected in the first quarter, Dish could shed at least 37,000 of its 13.8 million customers this quarter, says Sanford C. Bernstein & Co. analyst Craig E. Moffett. That would be the first time a satellite TV player has lost subscribers since the industry began its growth spurt a decade ago, he says. Meanwhile, AT&T , which accounts for a big chunk of Dish's new subscribers by bundling video with its phone and Web offerings, recently said it plans to ditch the company by yearend and possibly hook up with DirecTV. "Dish," Moffett says, "is between a rock and a hard place."

Ergen is hustling to get Dish back in the game. He has frozen prices on some services. Dish has opened a new service center to help counter a 15% jump in subscriber defections. Dish also says that it is five months ahead of schedule in adding new HD channels—though it still trails DirecTV.

It's not clear, however, that these moves will be enough to boost Dish into a sustainable orbit. If AT&T bolts to DirecTV, as seems increasingly likely, Ergen would be left with a few small regional phone companies as partners. That could force him to do something he really doesn't want to do: merge Dish with DirecTV, which is controlled by Liberty Media, the company owned by his archrival John Malone. A painful choice, for sure, but possibly Charlie Ergen's only real option.

DKSat

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