DISH Network serves up fare intended to whet everyone's appetite for televised entertainment. The #2 provider of satellite-based pay-TV in the US (behind DIRECTV), the company serves about 14 million subscribers, which includes business clients in such industries as hospitality, restaurant, and retail. Programming includes premium movies, SIRIUS radio, on-demand video service augmented by its Blockbuster assets, regional and specialty sports, local and international channels, and pay-per-view in addition to basic video programming. It offers bundled voice and Internet services through partnerships with voice and data communications providers. Co-founder and chairman Charlie Ergen controls about 90% of the company.
DISH offers about 3,200 local channels, including standard definition channels in all US markets and HD channels in 170 of the more than 200 national markets. It also carries 60 Sirius radio channels, 30 premium movie channels, 35 regional and specialty sports channels, 275 Latino and international channels, and 70 pay-per-view channels. Its DISHOnline.com service allows subscribers to watch more than 270,000 movies, TV shows, clips, and trailers online from personal computers, smartphones, and other mobile devices. Blockbuster@Home makes more than 100,000 titles, including movies, TV shows, and video games, available by mail and in-store exchange, though its online selection still falls short of competitor Netflix, offering 10,000 video titles available by TV and 25,000 titles viewable online on a PC.
DISH provides its programming options via 13 satellites that it owns or leases from satellite equipment and services provider EchoStar (spun off by DISH in 2008). It will lease capacity on a satellite under construction that should launch in the second half of 2012. The company distributes its programming from operations centers also owned by EchoStar. DISH subscribers access the service using a small satellite dish and digital set-top receivers. The company's 12 customer call centers use software by CSG Systems for billing and customer service transactions.
As DISH works to build its subscriber base and keep up with satellite leader DIRECTV, the company faces the perpetual issue of keeping customer churn to a minimum. DISH has nearly 15% of the pay-TV market and monthly subscriber churn was down from 1.8% to 1.6%, but it has gradually lost ground to cable-TV provider Time Warner Cable. That competitor claims more than 14 million subscribers, which edges DISH out of its #3 position among all US pay-TV providers based on number of subscribers. That's a result of DISH having lost more than 165,000 net subscribers in 2011 from its gross addition of about 2.6 million subscribers compared to more than 3 million added the year prior.
The more than 15% decline in subscribers was driven significantly by competitors' promotional offers and programming discounts, as well as telecom companies taking an increasing share of the market, continuing global economic worries and struggles in the housing market, and depressed discretionary spending. Despite this shortfall, its subscriber revenue increased nearly 3.5% thanks to an increase in average monthly revenue per subscriber. Also, DISH's more than 50% improvement in net income was partially due to the decreased costs related to its lower gross subscriber gains, assisted by price increases and reduced expenses related to a settlement with TiVo.
Although it wasn't a key figure in bottom line results (contributing a modest $4 million of the $1.5 billion), it was DISH's acquisition of Blockbuster that provided much of the more than 11% total revenue increase. DISH's equipment and merchandise segment pulled in $60 million in 2010, but exploded to more than $1 billion in 2011 on $975 million in movie and video game rentals and sales from its Blockbuster operations.
Blockbuster was picked up in 2011 when DISH was the winning bidder in a hotly contested auction for the ailing video-rental behemoth's assets. DISH bought the company, which had been operating under Chapter 11 bankruptcy protection since 2010, in a transaction valued at around $320 million. DISH took possession of the video store operator's chain of more than 1,700 retail locations, through which it sells DISH Network service subscriptions. As 2011 revenues proved, the deal is already paying off. Besides physical merchandise sales and rentals, Blockbuster's established online video streaming website also provides a boost to DISH's on-demand video service.
In another deal that year, DISH offered to buy DBSD North America, the operating subsidiary of ICO Global Communications, for about $1 billion. DBSD North America had been functioning under Chapter 11 bankruptcy protection since 2009, and was indebted to DISH, one of its creditors. Once DBSD's satellites become operational, DISH will finally be able to offer broadband Internet service instead of contracting with third-party providers.
It followed the DBSD offer with a winning bid to buy the assets of bankrupt satellite communications provider TerreStar Networks (a subsidiary of TerreStar Corporation) for $1.4 billion in cash. The deal will give DISH valuable government licenses to use spectrum available for high-speed data, while paying off all of TerreStar Networks debt. DISH co-founder Ergen is one of TerreStar Networks' largest creditors through his control of EchoStar. Upon completion of the deal, DISH will begin design and construction planning of a nationwide, completely LTE high-speed wireless communication network.
Among recent efforts to expand its selection of programming, it signed a multi-year deal with the NBCUniversal-affiliated Universal Sports Network in 2012 to offer DISH subscribers access to coverage of Olympic qualifying, trials, and highlights, as well programming on a range of related sports, like swimming, track and field, skiing, and figure skating. DISH batted in another sports channel the previous year when it added the MLB Network to its lineup.
DISH also generates revenue from international operations in the UK, Mexico, and Denmark, which accounts for less than 5% of sales.