Dish Network Reports Slower Growth

Dish Network experienced slower subscriber growth during 2007, though it is hard to separate out the impact of better performance on this score by competitors, internal issues, slower housing starts and macro economic factors. “During 2007, our subscriber base continued to grow, but at a slower pace than in previous periods,” the company says.

“We believe that our slower subscriber growth was driven in part by competitive factors including the effectiveness of certain competitors’ promotional offers, the number of markets in which competitors offer local HD channels, and their aggressive marketing of such advantages," the company says.

In part, Dish Network was hampered by a delay in the launch of new satellites to support high-definition services. The company argues that the delay lead to gains by competitors better equipped to deliver lots of HDTV signals.

Dish executives also say subscriber growth was affected by worsening economic conditions which included a slowdown in new housing starts.

But there also were "operational inefficiencies" as well, and piracy and other forms of fraud seem to have been issues as well. All of those developments "affected both the growth of new subscribers and the churn of existing customers," Dish says.

Although video entertainment traditionally has been viewed as "recession proof," that thesis might be tested this year if there in fact is an economic slowdown underway, or starting. The problem is that economists need six months worth of data to declare that a recession started, six months earlier. We might not know for sure until the summer or fall whether that is the case.

Any one of the aforementioned developments could lead to slower growth. The problem is that it isn't clear how important each of the factors was. Given the number of new HDTVs being sold, it is conceivable that relative lack of HDTV programming alone could account for slowing growth, even if the other forces were not at work.

To some extent, the satellite delay is simply bad luck. But the fraud issues ought to be largely under Dish Network's control.

Neither are housing starts under company control. The issue is that more weakness likely will follow, not because of housing starts, but because in many markets owners seem to be selling second homes bought largely as investments. In the interim, it is likely many of those locations will be disconnecting some services.

If a slowdown in growth continues, it will be tough to figure out, in retrospect, what actually caused the slowdown, as several forces are operating at once, at least at Dish Network.