TiVo decision cuts Dish’s Q2 profit

Mon, 08/10/2009 - 8:05am
Associate Press

NEW YORK (AP) – Dish Network Corp. said Monday that its second-quarter profit slid 81 percent on TiVo Inc. litigation costs and rising expenses, but the nation's second-largest satellite TV provider managed to add subscribers and maintain revenue.

The Englewood, Colo.-based company earned $63.4 million, or 14 cents per share, for the period ended June 30. That's down from $335.9 million, or 73 cents per share, last year.

Analysts polled by Thomson Reuters, whose estimates typically exclude one-time items, forecast profit of 67 cents per share.

Revenue was nearly flat at $2.9 billion, with prior-year revenue coming in at $2.91 billion. Analysts expected revenue would not stray far from year-ago results, predicting $2.91 billion for the current quarter.

Total costs and expenses rose to $2.64 billion, which included a TiVo litigation expense of $196.4 million. In a worst-case scenario, Dish's court battle with TiVo could force Dish to yank its digital video recorders over patent claims.

Subscriber acquisition costs increased to $388.3 million from $371.4 million, while general and administrative expenses grew to $143.5 million from $122.3 million.

Dish, widely viewed as one of the weaker players in the pay-TV industry, says it added about 26,000 net subscribers – its first quarterly increase in five quarters. The pay-TV industry includes cable, satellite TV and phone companies that provide TV services.

Dish, which concentrates on being a low-cost provider, said its subscriber growth was helped by the digital transition on June 12, the completion of its security access device replacement program, and new sales and marketing efforts.

The company said its low-cost provider approach has been weakened by competitors' aggressive promotional pricing to draw new subscribers, as well as other promotions used to keep existing subscribers. Signal theft and other types of fraud have also hurt its position, but Dish said its security access device replacement program was meant to resecure its system.

Average monthly subscriber churn rate, or the rate at which it lost customers, fell to 1.73 percent from 1.87 percent.

DirecTV and former parent EchoStar (now a closely affiliated company) have thus far been on the losing side of a patent argument with TiVo. TiVo won a judgement against the two, but DirecTV and EchoStar are appealing – so far unsuccessfully.

The pair announced last week that the Patent and Trademark Office has said the TiVo patents in question may be invalid, but the PTO’s determination is preliminary, and the validity of the patents may yet be upheld.

Meanwhile, Dish afíliate EchoStar reported second-quarter total revenue decreased more than 20 percent to $383 million, compared with the corresponding period in 2008, though net income slightly more than doubled to $102 million, a feat accomplished through an investment gain.

The declining revenue was attributed to lower sales of set-top boxes and lower revenue per unit.

 – CED's Brian Santo contributed to this report

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