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Are Dish Network’s Marketing Costs Increasing?

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Subscriber acquisition costs

SAC (subscriber acquisition costs) constitutes a key criterion for pay-TV companies like Dish Network (DISH). Subscriber acquisition costs are costs incurred by a company to acquire new subscribers or retain existing ones. Advertising spending is a key component of SAC, in addition to costs incurred by Dish Network to install HD (high definition) and DVR (digital video recorder) receivers.

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Dish’s rise in marketing costs

Dish was asked during the company’s fiscal 3Q16 earnings call whether the company expected a rise in marketing costs, given the rise in competition from Hulu’s proposed online television service and AT&T’s (T) DIRECTV Now.

Dish stated that there has been a rise in its marketing costs ever since the launch of its Sling TV service. The company also stated that it has added content “not in response to competition or expected competition” but rather because it is “ready to expand” and is “going after new market.”

Dish also pointed out that the rise in television advertising for its Sling TV was a result of the company’s belief that Sling TV can now appeal “to a broader segment of the market.”

As the chart above indicates, in fiscal 3Q16, Dish’s SAC per subscriber fell 13% year-over-year to $640. This fall in SAC per subscriber was primarily a result of declining hardware costs for each activation.

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