DISH Network Earnings Call Insights: Wireless Strategy, Blockbuster@Home

On Monday, DISH Network Corp (NASDAQ:DISH) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.

Wireless Strategy

Craig Moffett – Sanford Bernstein: Two questions if I could. Charlie, first with respect to your wireless strategy, would you say your interest in further spectrum acquisition at this point is fully satisfied or would you have interest in longer-term spectrum plays LightSquared, for example, in its bankruptcy? Second, if you could just comment on the litigation with AMC and your decision not to carry AMC going forward at their ask-forward prices? I know you have said those two things are unrelated, but if you could just comment on those two things.

Charles W. Ergen – Chairman: I think I will start with AMC, maybe Joe will jump in here. We have very, very specific viewer measurement here, much more granular than someone like Nielsen would have, and so we are able to watch our customer base and realize we skew a bit more rural and so we just don t – if you look at the Rainbow programming, they have very, very, very, low viewership outside of a few obviously popular channels on AMC. Those particular channels are also available to our customers through variety of other sources like iTunes, Amazon and Netflix and so forth, and so on. So, one of the things that programmers have done is they have devalued their programming content by making it available in many multiple outlets and so when someone asks for pricing – and we just happened to be up at the end of our contract, so we look at it, our customers are not really saying we want to pay more money, they are saying we want more flexibility in our programming and we don’t want to pay more and so when you look at that from a timing perspective that’s just a contract that we can change and we believe the product has actually been devalued. Not that there is not some good programs, but it’s been devalued because you can get it in multiple ways and customers are asking for more flexibility or have more flexibility to get the programming. So, it’s not quite the same if something was exclusive. So, we look at that and say, this is a good opportunity to make a good business judgment call. I mean obviously, there is a price, where a Rainbow product makes sense. We just don’t think that’s where we are today. Joe, do you have anything to add to that?

A Closer Look: DISH Network Earnings Cheat Sheet>>

Joseph P. Clayton – President and CEO, DISH Network: No, I mean, we’re facing situations where we want to reduce programming costs and the programming providers are raising them. So, they’re going the exact opposite way, so we’re trying to find the right balance here.

Charles W. Ergen – Chairman: It would be really interesting, because it’s easy to make a short-term gain by – I think all MVPD companies are going to take a look at this, we’re not going to be the last one to take a look at these kind of issues. When you are in marketplace when typically most customers have four providers to choose from, who offer exactly the same thing, there’s probably going to be some breakout of one or more companies offering something a little bit different, at little different prices, so customers have a bit more of choice, that maybe disruptive short-term, but maybe a chance to gain market share long-term. So, a lot of things have been going on I think over the next year or so in the programming side, we just made a decision based on real data from our customers. On the wireless side, I guess I’d answer it from a big picture perspective which is, our focus right now is really on getting the FCC approval. That’s we own about 6 megahertz for most of the country today in 700 megahertz, as 40 megahertz is at stake here, that would give us about 45 megahertz nationwide, and that’s enough to get in business. I mean obviously that rulemaking now is in front of the FCC. We’re disappointed that we didn’t get the waiver to enter the business today, but we’ll certainly work with the FCC to make get the rulemaking done as fast as possible would allow us to enter the business. Long-term, I think that there is only two companies that are well positioned spectrum wise for the long haul and that’s AT&T and Verizon. Verizon even better – potentially even better if they are able to purchase a cable spectrum, so I think that long-term I think that you’re going have to have for people to compete they are going to have to have spectrum, but there is a variety – they hope there will be new spectrum coming on the market, hopefully they will be other ways to make spectrum more efficient and we certainly think that if we’re allowed to enter the marketplace of 45 megahertz spectrum, it’s is certainly enough to enter the marketplace and compete.

Blockbuster@Home

Vijay Jayant – ISI Group Inc.: Couple of questions. First on the Blockbuster@Home, can you give us any sense on how that product take up has been for folks that can choose it not as part of the ATC top 200, when it comes as part of it. So, on a standalone basis have people chosen that product and if there is any subscriber count on that? Second, as you mentioned that programming cost was little higher this quarter and there are some changes you are making, but can you talk about his retention strategy today on your subscriber base when you have 40 million subscriber obviously churn improved was there any increase on retention spend at all?

Robert Olson – EVP and CFO: Vijay, this is Robert. I’ll take the first question and Bernie Han will take the second question on retention. The Blockbuster@Home package has performed very similar to a premium movie channel packages when we offered it during a promotional period for customers that we get a relatively high take rate during the promotional period when the promotional period rolls off some of those customers drop off, but a good number of them stay and so we look at that curve being very similar to premium movie channels. Keep in mind that the Blockbuster@Home package was first launched in October at that time customers got either three months or 12 months promotional period depending on their programming package. We since moved to a three month promotional period for all customers and so we have limited data at this point, but everything we’ve seen says it’s tracking very closely to premium movie channels.

Bernie Han – EVP and COO: With respect to churn, what we have been trying to do for the last year or so is not only get our churn improved which we have over the last few quarters, but also to do so by spending while at the same time spending less money and we have been successful at doing that for the last two quarters at least. This quarter as Joe and Robert alluded to, our churn was helped out pretty much early by not having a price increase occur this year, it would normally occur in the month of February. We’ve done a lot besides that to try to improve churn without spending more in money in things like coordinating our efforts on the retention side with customer service, there is a lot of synergies as it turns out between those two functions. We are spending more on reactive treatments rather than proactive treatments with our customers, and we are trying to make our customers simply just more aware of the things that are already provided as part of their programming packages that already come with what they already paid for rather than trying to give them more. So, all of those are helping with us reducing churn at the same time spending less money, but again, in this quarter the lack of price increase probably had the biggest impact.