Net income hurt by $280 million fine for violating 'Do Not Call' law
The bloodletting for Dish Network continues: America’s No. 2 satellite operator reported a net decline of 196,000 pay-television subscribers in the second quarter of 2017, and missed Wall Street expectations for both revenue and profit.
For the second quarter of 2017, Dish reported revenue of $3.64 billion (down 6% year over year) and diluted earnings per share of 9 cents. Financial analysts expected Dish to report revenue of $3.72 billion and EPS of 74 cents.
Dish’s net income of $40 million for the period — dropping 91% from a year ago — was hurt by a record $280 million fine that a federal district court ordered the company to pay for violating the “Do Not Call” telemarketing law. Under the June 5 ruling in the case brought by the U.S. government and several states, Dish is subject to certain compliance reporting and monitoring requirements for third-party telemarketers. If Dish violates the conditions of the court order, it will be barred from conducting any outbound telemarketing for two years.
At least Dish’s sub loss for the most recent quarter wasn’t as bad as last year: In Q2 2016, the operator reported its worst-ever quarterly subscriber loss, dropping a net 281,000 subs (including an estimated decline of between 315,000 and 330,000 traditional satellite TV customers). Dish lumps together both satellite and Sling TV over-the-top customers in reporting subscribers, forcing investors to guess at how poorly its core satellite biz is faring.
Overall, now that Dish and other major operators have reported Q2 sub declines that weren’t as terrible as anticipated, “this suggests stabilization for 2Q17 vs 2Q16,” RBC Capital Markets analyst Steven Cahall wrote in a research note Thursday. He added that Time Warner and Scripps Networks Interactive both continued to see “stable universe sub declines” in the 2% range for Q2, while Discovery’s cable networks were closer to 4% declines.
Other big pay-TV operators also saw negative sub growth in Q2, which is historically a weak season for the sector. But the damage hasn’t been as bad as some had feared. While AT&T had a record loss of 351,000 U-verse and DirecTV satellite accounts (offset somewhat by DirecTV Now gains), cable giant Comcast had a not-too-horrible net decline of 45,000 residential video subs and Charter Communications and Verizon shored up sub declines versus the year-ago quarter.
As of June 30, 2017, Dish had 13.332 million pay-TV subscribers, down from 13.593 million at the end of second quarter 2016.
Dish, searching for a way to stop the customer drain, launched the “Spokeslistener” marketing campaign earlier this year centered around empathizing with consumers instead of leading with a price/value message.