This much is clear from recent earnings reports by the two satellite TV providers, if their stock charts didn't already clue you in. Dish, which is traditionally the low-cost provider with the faster-growing customer base, is now losing subscribers while DirecTV is adding new ones. That's despite DirecTV's easing off its promotional programs in order to refocus on high-quality sales to high-end and dependable consumers, while Dish is doing all it can to reverse the trend.
Dish reported $3.2 billion of second-quarter revenue, a 9% increase over the year-ago period and 3.6% above the first quarter. Given that the subscriber count held still enough for a long-exposure photograph -- losing 19,000 subscribers out of 14.3 million is no disaster -- the company is doing some good work in squeezing more sales out of every remaining customer. There's a wide-ranging hardware upgrade program going on hand-in-hand with a push to get high-definition content into more living rooms, and I'd say those initiatives are working.
There's more proof of life on the bottom line, as earnings more than quadrupled from $0.14 per share to $0.57 per share on a year-over-year basis. Once the satellite infrastructure is in place, adding more users to those upsell services is a high-margin game. This is a common tactic in the broadcast media industry because satellites are expensive to launch and both fiber-optic and copper cables are expensive to bury.
Whether you're DirecTV or Comcast (Nasdaq: CMCSA ) , Dish or Verizon (NYSE: VZ ) , you pretty much have to make up for those pricey installations by holding your customers' feet to the fire now and again.
But the long-term health of a broadcast business lies in adding new customers on a regular basis, which isn't happening for Dish these days. If I'm reading the turtle plastrons right, DirecTV is getting ready to join forces with Dish and thereby create the largest subscription service in broadcasting.
That would bring about entirely new economies of scale, and the move may eventually be necessary in order to keep the satellite industry alive. DirecTV should be the buyer in such a deal, bringing a nice little buyout premium to Dish owners.
But if I'm wrong, this company and its stock are heading down a dead end. Would you buy Dish today? Tell me why (or why not) in the comments below.