SkyFILES: You Think It's Gonna Get Easier?

[silversurfer]

From our friends at SkyReport.com

It wasn't news the financial community wanted to hear from its satellite darling - EchoStar.

On Tuesday, EchoStar released what it and analysts called disappointing third quarter results. The lackluster numbers included ARPU of roughly $51 (below most Wall Street estimates) and subscriber growth of 285,000 (also below Street estimates).

Once the numbers were out, and Charlie Ergen and Co. pondered the results via a conference call with analysts, Wall Street sent the DISH stock down nearly 13 percent.

Was it the delay in releasing new products, such as SuperDISH? Did the company cut back advertising and promotion? Did DirecTV (which beat DISH Network's subscriber gains for the first time since 1Q 2002) pick up the customers EchoStar couldn't because of NFL Sunday Ticket? These questions and more were floated by numerous analysts.

The Wall Street reaction was so intense that it lead one analyst - Doug Shapiro of Banc of America Securities - to place the DISH stock as one of its top picks, giving it a "Buy" rating and a 12-month price target of $43. "While overall results were light, notably net adds and ARPU, we were shocked at the severity of the sell off," he said.

So, the superhero of the satellite business can have a financial quarter or two that aren't so good. But before people begin to think things will start coming up roses for satellite TV, there are significant challenges ahead for the business (and this applies just as much to DirecTV and VOOM as EchoStar, and perhaps competitors like GlobeCast and others).

Satellite TV companies are poised to expand their slate of offerings, and that's going to increase SAC (subscriber acquisition costs).

DirecTV's $99 promotion for receivers covering up to three rooms, including a DVR, helped the satellite TV company's recent net subscriber additions. But it came at a cost: SG Cowen said there's a subsidy of up to $425 on the deal, which drove SAC to $590.

EchoStar's SAC for the third quarter was around $500, an improvement over the $537 reported during the same period last year. SG Cowen predicts EchoStar's SAC to gradually rise to $574 by 2007.

With additional hardware subsidies and subsidized professional installs for equipment that's going to be much more complex to place on roofs and in the living room, services are going to record higher SAC. And SAC is going to rise while companies deal with more intense competition from cable, and pressure to keep prices down for consumers while they deal with things such as rising programming costs.

This all doesn't mean EchoStar won't be the apple in a lot of analyst eyes. But it's not going to get any easier for DISH, which Ergen admitted "didn't execute as a company."

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[rcbridge]

Just a general observation, but any business will have some bad quarters
as we have seen in the corporate world from what were "blue Chip"
stocks to new businesses, the real issue is how will he recover.
If any CEO can make money forever without a fall he is a rare one.
So lets see what Charlie does from here.

 

[JosephF]

It's pretty bad when making money (just less than some legalized gamblers expected) means the sky is falling

 

[silversurfer]

Yes they will have bad quarters but I think this paints a bigger overall picture about the problems E* is having. They keeping making promises that they aren't keeping i.e the release dates for new equipment. They have not produced a bug free receiver in a long time. They are enforcing the telephone requirements. These are all things that will make a customer switch services.

 

[JosephF]

I would agree with you when it comes to DVR receivers, but the last mainstream product (the 301) has been an exceptional product.

We can only hope that the 111, 311 and 322 at the very least match the reliability and performance of the 301.

I've also not heard of many complaints about the 510 (other than the fee). But then again, this is what, their 3rd try at this product (501/508/510).

 

[AppliedAggression]

I would agree with you when it comes to DVR receivers, but the last mainstream product (the 301) has been an exceptional product.

We can only hope that the 111, 311 and 322 at the very least match the reliability and performance of the 301.

I've also not heard of many complaints about the 510 (other than the fee). But then again, this is what, their 3rd try at this product (501/508/510).

It's actually still their first try. The 501,508 and 510 are all the same. The only difference is the hard drive size. They all run the same software and if you consider a change of hardware to be another try, then i'd say it's still their first crack at it. Although the 5series dvrs seems to run well now and since i've had one about a year ago the case wasn't always so. They were missing some key features which they have now and were pretty buggy, but now they seem to work perfect.

 

[video62]

...They are enforcing the telephone requirements. These are all things that will make a customer switch services.

What DBS service can I go to that doesn't enforce telephone requirements? Or is it that there's no longer an 'advantage' to using E* which had rather lax phone line checking in the past?

 

[silversurfer]

There is no DBS service that does not have a phone requirement. It has just not been enforced in the past. D* at this time is lax on their requirement and have not been enforcing it. However, that is subject to change. Unfortunately many customers (including myself) have taken advantage of this over the years. My daughter's room does not have a phone jack. With all the advancements in cell phones and voice over IP many households no longer have a wired phone. Personally I think both companies need to expand their offerings in this regard. Why not make a lan port available on the back of a receiver. I know that would not cover someone with no internet connection but at least it would provide more options.

 

[James Long]

Why not make a lan port available on the back of a receiver. I know that would not cover someone with no internet connection but at least it would provide more options.

If they made it so the boxes could ping each other on the network (using Broadcast IP that routers wouldn't pass)? Perhaps some DiscEsc way of one receiver signalling another through the DP switch? Some way of making sure that receivers are connected in the same house.

Neighbors could probably still steal this way, but it would cut down on the threat of cross town or cross country account sharing.

JL