Dish churn spikes in Q1, loses 552K pay TV subs across satellite, Sling TV vMVPD

Dish Network continued to see subscribers leave its pay TV systems in the first quarter as churn spiked sharply and the company reported losing a net total of 552,00 subscribers across Dish TV satellite service and its virtual MVPD Sling TV.

The steep losses are markedly worse than the 462,000 net pay TV subs Dish lost in Q1 of 2022 (or the 268,000 in Q4 2022) and bring its pay TV total to 9.19 million.  Sling TV now has a base of 2.1 million subscribers, around 230,000 less than it ended Q4 with. At last disclosure competing vMVPD YouTube TV had around 5 million users, while Hulu + Live TV had 4.5 million as of December 31 (Disney reports Q1 on Wednesday). On the satellite side Dish lost just over 300,000 subscribers in the period, ending Q1 with a base of 7.09 million (which as MoffettNathanson analysts pointed out, that base is “roughly half the size it was a decade ago.”)

Dish is shedding pay TV subscribers as it also looks to fund and build out a 5G wireless network, with the intent of competing as a fourth facilities-based carrier. It currently operates Boost Mobile as an MVNO but also experienced wireless losses in the quarter, reporting a decrease of approximately 81,000 net subscribers.

Overall net income in the period was $223 million, down from $433 million in the same period a year ago. Total revenue of $3.95 billion was down from $4.33 billion in Q1 2022.

Notably, in the Q1 period Dish was hit by a cybersecurity incident, which was first disclosed during the company’s fourth quarter earnings call in February. In the time since cyber security attack in late February Dish acknowledged certain data from corporate IT systems were taken but kept fairly tight-lipped about causes and impacts. However, in its 10-Q filing with the SEC Monday Dish said the investigation into the incident is now substantially complete.

“We have determined that our customer databases were not accessed in this incident. However, we have confirmed that certain employee-related records as well as a limited number of other records containing personal information were among the data extracted,” Dish stated in the SEC filing.

It went on to say that it’s take steps to protect the personal information and got confirmation that the extracted data was deleted and doesn’t have any evidence that it was misused.

“While we have no evidence that this data has been misused, we have started the process of notifying individuals whose data was extracted,” Dish continued.

During the incident Dish’s satellite TV, vMVPD and retail wireless service and data networks remained operational, but it caused an internal systems outage that impacted IT and communications systems as well as some customer-facing websites that impacted consumers ability to access accounts and pay bills.

Dish also disclosed incurring expenses related to the cybersecurity incident, approximately $30 million in Q1, including to fix the situation and provide additional customer support. The company suggested that cybersecurity costs are behind it and said all systems have been restored.

Dish TV churn spikes

In a May 8 research note to investors, analysts at MoffettNathanson pointed to questions that were raised about impacts, such as whether there would be a spike in satellite TV churn, or if it would fall because Dish couldn’t process disconnect request; or if satellite TV ARPU would fall because customers couldn’t order pay-per-view, among other questions.

Analysts led by Craig Moffett pointed out that Dish hadn’t offered guidance on any of the questions raised.

“Well, now we know what happened in Q1. Losses were bad – the company missed on most key metrics,” wrote Moffett.

Still, he noted it isn’t entirely clear how much the rate of declines in the quarter were out of the ordinary.

“The decline in the satellite TV business accelerated sharply, with the company losing 318K subscribers,” wrote Moffett, adding the results were significantly worse than losses a year ago and the 214,000 anticipated by analyst consensus. The firm said it means Dish’s core satellite TV business is contracting at an annual rate of 11.2%, the worse rate since before the pandemic.

However, MoffettNathason said the decline in gross additions wasn’t the real issue, instead it was churn at Dish which jumped “much higher” than the year prior or than what Wall Street expected.

“Dish’s churn rate of 1.98% was up 39 bps [basis points] from a year ago, an almost unprecedented jump, missing consensus by an astounding 62 bps,” wrote the firm.

And back to the uncertainty of results, Moffett noted that “it is unclear whether this result would have been worse had the company been fully able to process service termination requests.” As a result, the firm said it’s uncertain if Q2 results will likewise be bad, or worse than Q1.

As for its virtual pay TV business, Moffett pointed out that Sling TV subscriber metrics also “missed consensus by a wide margin.”

Related to its pay TV business, Dish during the quarter also introduced a new video offering – it’s free ad-supported streaming TV (FAST) Freestream.  Last week Freestream, which is free to use and doesn’t require a subscription, announced reaching over 335 channels. Dish hasn’t disclosed any metrics yet as to users, engagement or ad revenue from Freestream. The company’s scheduled to hold a first quarter earnings call at noon on Monday.