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How Dish Network Is Positioned as It Transitions to Connectivity

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Part 2
How Dish Network Is Positioned as It Transitions to Connectivity PART 2 OF 19

Has the Pay-TV Business Become Unattractive for Dish Network?

Dish’s pay-TV business

Dish Network’s (DISH) pay-TV business has exhibited a declining trend over the past few quarters. The company’s pay-TV subscriber losses intensified in the second quarter, with subscriber losses of 196,000 in 2Q17 compared to subscriber losses of 281,000 in 2Q16.

A major reason for Dish’s subscriber losses has been the rising popularity of video streaming platforms. This trend of rising pay-TV subscriber losses and the popularity of Dish Network’s Sling TV has also affected the company’s ARPU (average revenue per user) and SAC (subscriber acquisition costs).

Has the Pay-TV Business Become Unattractive for Dish Network?

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Dish expects its ARPU to continue falling. In 2Q17, Dish had an ARPU of $87.25, a decline of 3% year-over-year. Dish expects this fall in its ARPU to continue as the company experiences a rise in Sling TV subscribers, who could opt for lower-priced packages compared to its pay-TV subscribers.

How subscriber losses are affecting Dish’s subscriber costs

Dish Network’s subscriber acquisition costs have also exhibited a downtrend for the past few quarters. Subscriber acquisition costs are incurred by a company to acquire new subscribers or retain existing ones. Dish pointed out during its 2Q17 earnings call about the changing SAC trends in the pay-TV industry.

The company stated that while it previously gained subscribers for around seven to ten years by spending ~$800 in SAC, this is not the case now. Dish Network noted that this was due to the rising entrants in the OTT (over-the-top) industry and the popularity of video streaming services.

Considering the changing landscape, Dish is increasingly focusing on acquiring subscribers where there are limited viewing options, such as in the rural United States (SPY). In this scenario, the company has declining SAC.

As Dish Network’s Sling TV viewer base increases, the cost of acquiring Sling TV subscribers could be significantly lower than to acquire pay-TV subscribers. This factor also contributes to the company’s declining SAC.

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