American consumers in the market for satellite TV service have two choices: EchoStar's (NASDAQ:DISH) DISH Network or DirecTV from the DIRECTV Group (NYSE:DTV). It just so happens that both companies just reported earnings, so I thought I'd take this opportunity for a little compare-and-contrast action.

Just the basics, thanks
At the core, these two rivals are in the same business, with the same tools, goals, difficulties, and opportunities. Their basic idea is to send up and maintain a fleet of communications satellites, and then sell TV programming bounced off those satellites to as many customers as possible, for as much money as possible. But they're going about it in different ways, and with different results. Let's take a 30,000-foot overview look (figures in millions, where applicable).

DirecTV

EchoStar

Subscribers

15.7

12.8

Revenue per subscriber

$72.74

$62.86

Current SAC*

$631.71

$689

TTM free cash flow

$1,081

$568

TTM gross margin

31.60%

45.20%

TTM net margin

8.40%

6.30%
*Subscriber Acquisition Cost, or amounts spent on customer acquisition divided by gross subscriber additions.
 Figures taken from 10-Q reports, including EchoStar's and DirecTV's results reported earlier this week.

You can see that DirecTV extracts a good deal more money from each subscriber for its services than EchoStar does. The company also pays less for each new subscriber, and keeps more of the revenues as profits. How does DirecTV pull off that impressive trifecta, given that both companies do essentially the same thing?

Driving Miss Dishy
The two companies have somewhat different goals. EchoStar is trying to grow its customer base as quickly as possible. Management is willing to spend plenty of money on promotions and advertising to attract lower-revenue customers. Conversely, DirecTV explicitly focuses on high-quality subscriber acquisitions, so the company prefers to compete on service quality and premium packages rather than on price.

For example, DirecTV has a working relationship with digital video recorder pioneer TiVo (NASDAQ:TIVO) and currently provides its customers with true-blue TiVo service on its own line of DVRs. EchoStar, on the other hand, developed its own version and is fighting TiVo in court, tooth and nail, over the right to use these knockoffs. The litigation costs are a drag on EchoStar's net margins, and at last report, the company was losing the battle. But of course, there's always one more appeal, right?

That's a great-looking dish. How much?
Despite the comparable subscriber counts and only 45% higher revenues, DirecTV sports nearly twice the market cap of EchoStar today -- $28 billion vs. $16.3 billion. That makes EchoStar's trailing P/E ratio 28, while DirecTV's is a loftier 34. It's your call whether DirecTV's efficient operations and selective customer growth is worth a 21% price premium, but you might also want to keep in mind Comcast's (NASDAQ:CMCSA) generous P/E of 34 times trailing earnings.

Satellite broadcasting used to be a market darling, but not anymore. These companies don't have any real answer to the "triple play" strategy Comcast and its cable brethren are offering, pushing voice, video, and data traffic through the same network connection to our homes. That's why EchoStar is partnering with AT&T (NYSE:T) to provide such a package, particularly in rural areas where the telecom giant can't justify the expense of installing fiber-optic infrastructure. 12% of EchoStar's new subscribers come from that alliance.

It's also the reason for those persistent merger rumors, where DirecTV and EchoStar would join forces, possibly under the banner of DirecTV chairman Rupert Murdoch's News Corp. (NYSE:NWS). The resulting Brobdingnagian behemoth would certainly have imposing market clout, but for that very reason, the FCC is unlikely to approve such a deal. Still, the rumor mill grinds on, and the hookup idea keeps popping up.

The Foolish bottom line
Do you dare invest in either of these companies today? On the one hand, we have EchoStar, the fast-growing underdog, reaching for every customer it can land. On the other, there's market leader DirecTV, less desperate for subscriber growth but able to raise prices without losing its customers. The boutique operation trades at a premium to the everyman option, and together they dominate a market that may have met its limits already.

It's a tough call, so let's see what your peers in the Motley Fool CAPS service are thinking on the matter. DirecTV rates three stars in that system, while EchoStar receives our lowest rating, a single star. On DirecTV's competitive advantage, TMFSquiggly says:

Exclusive provider of NFL Sunday Ticket. That's all I need to know.

And moskowman adds this take on EchoStar's earnings quality:

Debt directly attributed to a stock buyback to artificially inflate EPS to cover up the horrible net earnings. A lost patent suit to TIVO. Increase in customers, yet at a higher cost. Cable companies about to bundle services and steal all consumer surplus. Have you happened to see the latest DirectTV ad "moNOpoly?" Losers typically call this code red. The list goes on and on.

In summary, what scofflaw1 says about EchoStar should apply equally to both companies:

As telco and cable move to IP based infrastructures that can support substantial high-def channels, high speed internet, video on demand, VOIP services and internet gaming the inherent flaw in the satellite architecture will be exposed and revealed in higher customer churn rates. This is a terrific long term secular short call.

There you have it: a community skeptical of satellite TV's prospects in general, but EchoStar's in particular. What do you think? Feel free to weigh in with your own thoughts on either company, or both. The more we share our research and opinions, the better for all of us.

Further Foolishness:

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolishdisclosureis always a viable option.