Dish Networks Loses Satellite TV Subscribers but Grows Profits

Satellite TV provider Dish Network traded up more than 20 percent in Monday's trading on better than expected profits and the loss of fewer subscribers than analysts forecast. The stock had fallen by nearly half over the past year as the company loses customers to rival satellite TV company, DirecTV Group. Dish continued to lose subscribers, 94,000 this quarter, though fewer than the average analyst projection of 128,000. Despite this ongoing decline Dish beat analyst expectations with earnings of 70 cents per share, up from 58 cents per share in the year-earlier quarter. Revenue dropped 14 percent in the quarter.

Competition with DirecTV is sure to weigh on Dish through the recession because of its target demographic. Dish serves lower-end customers, which means they're more likely to give up their satellite TV service when times get tough. To remain viable and differentiate itself, Dish offered a $9.99 deal, but the company's CEO says that this incredibly low price doesn't fit with the company's long-term business strategy. I can see why Dish would need to add this price point to keep subscribers on the fence. But if it drops that price point, won't subscribers leave then?

There are a couple reasons Wall Street is happy with Dish. CEO Charles Ergen said on the earnings call that his business has stabilized after falling off a cliff last year. (This echoes the sentiments of the media giants about the ad markets). Ergen also reassured analysts that he is done moving around his executive team. There are also some strong signs the company is starting to manage piracy of its set-top box software, which has been a major problem. Many analysts thought Dish got a real boost from the end of analog TV, which forced many Americans to sign up for a new pay-TV service. But Ergen says this transition didn't have much of an impact on the company, so following quarters shouldn't suffer a drop-off.

Ergen is confident he will be able to turn around his company. A lot depends on how consumer confidence holds up. But one thing is for sure: the worse the economy, the more time people spend at home, watching TV.