More subscribers generating more revenue — this is what DISH Network (NASDAQ:DISH) delivered when it reported third-quarter results on Tuesday morning, and really, what more could the market ask for? Shares popped as much as 3 percent in early trading on the news.
Dish reported that it gained 35,000 new pay-TV customers in the third quarter, which compares favorably to expectations for a loss of about 39,000 customers, bringing total pay-TV customers to 14.049 million. Average revenue per pay-TV customer increased 5.3 percent to $81.05, while the subscriber churn rate decreased to 1.65 percent from 1.8 percent in the year-ago period. In addition, Dish added 75,000 net broadband subscribers in the third quarter, bringing the total broadband subscriber base to about 385,000.
Revenue increased about 2.3 percent on the year to $3.6 billion, edging out the mean analyst estimate of $3.58 billion. Subscriber-related revenue increased 6.1 percent on the year to $3.47 billion. Earnings came in at 68 cents per diluted share, up from a loss of 35 cents per share in the year-ago quarter and well above estimates for a gain of 44 cents. Net income climbed to $315 million from a loss of $158 million in the year-ago period.
Dish has occupied a lot of headlines alongside Disney (NYSE:DIS) recently, thanks to a contract dispute between the two companies. A content contract expired more than a month ago, and the two businesses haven’t yet been able to hash out some salient details related to digital rights and, specifically, an increasingly controversial digital video recorder called Hopper that is produced by Dish. Hopper allows users to record shows and skip advertisements.
Similar to the contract dispute between Time Warner Cable Inc. (NYSE:TWC) and CBS Corp. (NYSE:CBS) that resulted in customers losing CBS for an entire month, Dish and Disney are embroiled in intense negotiations over the rising costs of retransmission rights — the fees paid by pay-TV services to carry signals that are available over government airwaves. Content owners are looking to boost revenue due to the additional viewership on mobile platforms.
In the case of Time Warner Cable and CBS’s dispute, CBS was the undeniable winner in the standoff. Under the terms of the new agreement, Time Warner Cable agreed to significantly increase the price it pays for the right to carry CBS and, according to multiple media reports, the deal amounted to a cost of $2 per subscriber per month. Time Warner Cable also failed to obtain out-of-home rights for CBS-based content, except for CBS’s Showtime Anytime — CBS’s premium channel content.
In the case of Dish and Disney, Disney reportedly charges Dish about $5.54 per month per subscriber for rights to ESPN, a cost that some in the company think is much too high.