Dish Network (DISH, Financial) recently revealed its first quarter results for fiscal 2015 with net income of $351.5 million or $0.76 per diluted share, up from the year-ago quarter’s $176 million and beating the consensus estimate of $0.40 per diluted share. The company also saw revenues growing 2.8% from $3.6 billion in the first quarter of fiscal 2014 to $3.7 billion in Q1 2015, in line with the consensus estimate. Following the results, Dish Network shares dipped to $65.73 before recovering to $66.38 at closing bell.
Pay-TV subscriptions decline, churn rate rises
Dish Network reported the loss of 134,000 subscribers at its legacy Pay-TV segment, closing the quarter with 13.84 million subscribers, down from the 14.09 million subscribers in the prior-year quarter. At the same time, while the company added 639,000 gross new Pay-TV subscribers in Q1 2014, the figures dipped to 554,000 gross new subscribers in Q1 2015. The company attributed the subscription losses to programming interruptions, including the three-week long dispute with Fox, a month-long absence of Turner networks on its channels and a 12-hour absence of CBS programming. The disruptions, which started during the fourth quarter of fiscal 2014, bled into Q1 2015 also. Consequently, subscriber churn rate also increased from 1.42% in the year-ago quarter to 1.65% in Q1 2015. However, revenues for the quarter grew on a year-over-year basis on the back of an increase in subscription charges. Dish Network saw its Pay-TV average monthly revenue per user coming in at $86.01 for the quarter compared to $82.36 in the year-ago quarter.
At its Broadband segment, Dish Network added 14,000 net subscribers, closing the quarter with a total of 591,000 broadband subscribers. This compares poorly with the 53,000 net subscribers added in the first quarter of fiscal 2014. Revenues from the segment dropped from $166 million in the prior-year quarter to $108 million. Notably, the first quarter results did not include subscribers at the company’s newly launched SlingTV, with the company only saying that the subscriptions were "encouraging."
Further, in the first quarter, Dish Network saw sales from equipment and merchandise sales and other revenues touching $22.5 million, up 1.5% year over year. However, equipment sales, services and other revenues from the company’s EchoStar division declined 19% year over year to $12.8 million.
Subscriptions decline pan-industry
While Dish Network competes with businesses such as Comcast Corporation (CMCSA, Financial), DirecTV (DTV, Financial) and Times Warner Cable Inc. (TWC, Financial) in the diversified entertainment sector, its main rivasl in the Pay-TV sector are Netflix Inc. (NFLX, Financial), Verizon Communications Inc.’s (VZ, Financial) FiOS and AT&T Inc.’s (T, Financial) U-Verse. During Q1 2015, the Pay-TV industry at large lost nearly 30,000-40,000 subscribers, compared to the year-ago quarter when it added 250,000-270,000 subscribers. Experts opine that the decline represents the first ever Q1 net loss the industry has witnessed. Further, the industry has seen the fastest rate of decline in subscriptions, at a rate of 0.5% over the last 12 months.
Final thoughts
While Dish Network saw better-than-expected earnings for the first quarter of fiscal 2015, revenues grew mainly on the back of increased subscription charges. The company saw a significant year-over-year decline in net new subscriptions and closed the quarter with 14,000 less subscribers compared to the year-ago quarter. However, the decline is not intrinsic to the company and is a more pan-industry concern. Further, the company did not disclose the subscription figures for its newly launched SlingTV, which is being watched closely by investors as a make-or-break for Dish Network’s future growth prospects. SlingTV is also expected to face stiff competition from other sector players such as HBO Now, Sony (SNE, Financial) Vue and Apple’s (AAPL, Financial) soon-to-be-launched online TV service. The company has also not yet cashed in on the billions of dollars' worth of wireless airwaves it has acquired over the last several years, keeping the market guessing about its next move. Experts too are not upbeat about the company’s short-term prospects, foreseeing a 16.2% year-over-year decline in earnings at the end of the current fiscal. However, over the next five years, the company’s earnings are expected to grow at an average annual rate of 3.9%. Consequently, the Dish Network stock currently carries a "hold" guidance.
