As AT&T resorts to what he calls “uneconomic promotional measures” to slow subscriber erosion at DirecTV, the rival operator being hurt most is the other nationally distributed satellite TV brand, Dish Network, said analyst Craig Moffett.
“Ironically, these hyper-aggressive promotions at AT&T are likely to have their greatest negative impact on…Dish Network,” Moffett wrote in a report published earlier this week.
Indeed, AT&T is pushing DirecTV hard on the wireless side. Customers can get a two-for-one deal on the pricey new iPhone 8, for example, by agreeing to take on a DirecTV subscription. DirecTV lost 156,000 linear satellite customers in the second quarter.
Dish, meanwhile, lost an estimated 281,000 linear satellite TV customers during Q2. Having a competitor exert loss-leader pressure probably won’t help.
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“Dish’s total service revenues are now shrinking by 5.5% per year,” Moffett said. “But that understates it. Dish’s traditional video subscriber base is, by our estimates, now shrinking by 9.1% annually. A year ago, it was shrinking at 5.9% per year."
With customer additions for Dish’s virtual MVPD platform factored in, Dish’s rate of decline is only 3.1%, Moffett noted.
“But with industry-wide margins in the vMVPD business at or below zero, it is reasonable to simply ignore Sling TV subscriptions as economically relevant,” he added. “And with competitors like AT&T’s DirecTV Now, Hulu and Google’s YouTube TV all viewing their vMVPD businesses as loss leaders in service of an adjacent business, there seems to be little prospect for improvement.”
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In fact, the analyst calls the discounting of vMVPD services a “double-whammy” for Dish’s core satellite business.
“Super-low prices for vMVPD services not only accelerate the erosion of Dish’ traditional pay-TV subscriber base, they also put downward pressure on ARPU,” Moffett explained. "Dish Network’s closes competitor, AT&T’s DirecTV Now, is now offering its $35 "Live a Little" package, which we have elsewhere estimated caries approximately $31 of programming cost, for just $10 a month for unlimited wireless customers.”