Report on Shemaroo

One way forward for DTH, the Dish Network model?

Are there some learnings from how Dish Network is transforming itself in the US?


NEW DELHI: Many a TV  observer has predicted that direct to home television space will one day become extinct. While one can dismiss this as an exaggeration, the way Colorado-based Dish Network is evolving is probably what may come to pass with major DTH players. For one, Dish is continuing with traditional pay TV, even as it is evolving into a 5G wireless carrier. Speaking at Dish's annual year disclosure investor call chairman Charlie Ergen highlighted that 2020 was a successful transition year for the company,  which is on pace to become the US’s fourth major wireless carrier.

“The world is becoming an a-la-carte world with vendors going directly to their customers. But in the wireless world, we are one of four competitors. So there are three $200 million companies that are out there and we are entering their business with a better network to go compete. And it’s not just about competition for consumers or handsets, it’s about what a 5G network can do, which includes a lot more than just consumers,” said Ergen.

In fact, 5G is the focal point for the company, its investors and shareholders alike, as it banks on the spectrum to drive long-term growth. Last year, Dish built the first cloud-native OpenRAN-based 5G broadband network in the US and has already signed contracts with software partners, fiber providers, equipment manufacturers and tower companies.

“We have enlisted fiber providers like Everstream, Zayo, Crown, Segra and Uniti for front-haul and backhaul network support. We have reached an agreement with Crown Castle for wireless towers and just last month, we signed a similar agreement with Vertical Bridge. We have announced an agreement with Aviat for 5G microwave transport services and signed a deal with Mavenir for cloud-based messaging and Qualcomm to utilise our 5G RAN platforms. We have also completed our first 5G validation in December,” revealed Dish Network CEO Erik Carlson.

In the fourth quarter, Dish invested over $50 million in operating expense and capital expense in 5G deployment, informed chief financial officer Paul Orban, which is expected to increase substantially throughout 2021 as the company further steps up execution of the wireless network.

Ergen reiterated the company’s commitment to bring 5G online in major cities by the end of Q3 2021, saying, “This isn’t our first rodeo,” and exuded confidence in Dish’s ability to execute its ambitious 5G plans despite considerable risks.

In fact, its 5G push helped  its revenues and profits rise sharply, allowing it to report better than expected fourth quarter financial results. The US satellite TV provider has been historically focused on pay TV, but has been steadily bleeding TV subscribers each quarter. However, according to the company’s latest financial report, net losses for its pay TV subscriptions in the fourth quarter were less than a year ago. In fact, subscriptions are actually on the rise for its live TV streaming service Sling TV. The network lost 133,000 net pay TV subscribers, which was narrower than the loss of 1,94,000 subscribers reported during the fourth quarter of 2019.

“We also had a solid year in pay TV despite the headwinds presented by the pandemic. This was driven by our continued discipline and better execution in both Dish TV and Sling TV. And we have increased our revenue more than $2.5 billion from 2019 and our net income by nearly $400 million,” disclosed Carlson, adding that the company has introduced new plans and offers, shed unprofitable customers, and has been strategising to grow the business in 2021.

According to the company’s financial results, revenue soared to $4.56 billion for the three-month period ending 31 December 2020, from $3.24 billion – a growth of nearly 41 per cent year-on-year. Net income reached $733 million for the fourth quarter of 2020, up from $389 million from the year-ago quarter. 

Dish closed the quarter with 11.29 million pay TV subscribers, including 8.82 million Dish TV subscribers and 2.47 million Sling TV subscribers.

Carlson said the ongoing pandemic impacted commercial subscribers, with few subscription activations of nearly 2.35 lakh. “The activations are down year-over-year primarily due to Covid2019 and our approach to it. We reduced our marketing expenditures and our gross new TV subscribers have decreased. But Dish TV strategy has been anchored in acquiring and retaining long-term profitable customers. We have been focused on a more rural and higher credit quality customer base and we remain committed to that path,” he added.

Orban stated that the pay-TV revenue in the fourth quarter increased due to higher average revenue per user (ARPU), partially offset by a lower subscriber base. “The increase in pay TV ARPU was mainly driven by price increases for both Dish and Sling. Our subscriber margins for the quarter were positively impacted by the ARPU increases just discussed and our cost-cutting initiatives related to Covid,” he added.

Are there lessons from this for India's DTH players?

Probably. With four of  them in play today – namely Tata Sky, Airtel, Sun Direct and Dish TV – many analysts have predicted  they will have to expand their services into newer revenue avenues. Value added services – consisting of specialised programming packages covering entertainment, spiritual, education, health, etc – are de rigueur with them.

Tata Sky has diversified into offering broadband services additionally to its video services. Airtel recently bought back Warburg Pincus’s 20 per cent equity in Bharti Telemedia which operates Airtel Digital TV, and is looking at offering it as a part of its Homes package, which includes telephony, broadband and connected TV services. Dish TV and Sun TV, however, have to make strong steps in that direction.

Should they and can they foray into 5G services? It looks challenging because of the high spectrum charges envisaged. Amongst them, Bharti Airtel looks like the only entity with enough strength on its balance sheet to be able to invest big. That’s because it is a telco company which offers another customer facing service like DTH. The others will have to find innovative ways to get new revenue streams going, when streaming services make a heavier impact on subscriber numbers. 

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