Satellite TV giants Dish, DirecTV could lose 1 million subscribers: Q2

The biggest losses of pay-TV subscribers are now from satellite services including DirecTV and Dish, a June report from Credit Suisse shows.

The two US satellite companies could lose more than 1 million subscribers next quarter, and end 2019 with 12% fewer subscribers than they had at the end of 2018, based on the estimates.

Most of the losses will be at DirecTV, while Dish should see respite in the second half of the year.

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Satellite subscriber losses have been mounting year-over-year, and analysts at Credit Suisse expect the trend to continue throughout 2019, according to the firm's Jun. 3 report on the media and telecom sectors.

During the first quarter of 2019, the two major US satellite-TV companies combined lost more than double the subscribers they lost during the same period last year. DirecTV and Dish lost about 926,000 net subscribers altogether during the first quarter, up from 373,000 a year ago. They closed out the period with 9.4% fewer satellite subscribers than they had during the first quarter of 2018, according to the report.

Credit Suisse anticipates even greater subscriber losses, totaling more than 1 million, during the second quarter. It also projects DirecTV and Dish will end 2019 with 12% fewer satellite subscribers than they did last year — compared to a 7.5% drop year-over-year in the last quarter of 2018.

The decline in satellite TV

Pay-TV providers, including satellite companies, have struggled to keep customers as viewers shift to streaming services like Netflix and Hulu. Both DirecTV and Dish also offer streaming-TV bundles through their respective online services, DirecTV Now and Sling TV. But growth at those platforms hasn't been strong enough to cover the losses on the satellite side.

DirecTV and Dish still had more than 28 million satellite-TV customers at the end of the first quarter, or about one-third of all subscribers at the top US pay-TV providers, media-research firm Leichtman Research Group estimated.

And satellite TV isn't going away any time soon. People still rely on it in parts of the US, and the world, where broadband connections and cable service are unreliable or unavailable. In some places, satellite is also cheaper than cable.

But the Credit Suisse report suggests that the future of these satellite-TV services will depend on their “becoming more disciplined,” as the analysts wrote. They'll need to focus on customers who are more profitable for their businesses, rather than viewers who are drawn to heavy promotions, and both DirecTV and Dish will need to improve free cash flow to pay down debt.

The heaviest subscriber losses are at AT&T

This year, DirecTV, which has nearly double the subscribers of Dish, is expected to hemorrhage the most customers in the satellite space.

Read more: AT&T was mostly to blame for pay TV's bleak quarter, and analysts say the rest of 2019 looks even worse

DirecTV will account for at least 75% of the satellite subscriber losses estimated for each of the next three quarters, according to the Credit Suisse report. AT&T had told analysts to prepare for more losses at DirecTV in 2019, particularly as the 1.6 million video customers who were still locked into a two-year price guarantee during the first quarter reach the end of their promotions and consider canceling their services. The company expects fewer cancellations in 2020, and for those customers who remain to be more profitable.

AT&T is experimenting with many different TV packages, including its streaming-bundles DirecTV Now and the cheaper, WatchTV, as well as a streaming service due out later this year that will be a less-expensive replacement for its satellite offering.

Meanwhile, Dish Network, which lost more and more subscribers quarter-over-quarter and year-over-year throughout 2018, should get a respite from losses during the second half of the year. Credit Suisse only expects the company to lose about 100,000 satellite net subscribers during the third quarter and 128,000 during the fourth quarter, down from more than 300,000 during both periods in 2018.

That is as long as Dish stops sparring with media networks. AT&T's WarnerMedia and Univision recently removed certain channels from Dish's programming lineup, after carriage disputes with Dish, which drove some of the subscriber losses at the satellite service. Univision channels are now back on Dish.

Dish has renewals coming up for its contracts with Fox and cable channels FX and National Geographic, which are now owned by Disney, the report said.

“AT&T is essentially 100% of the sector's subscriber declines, and their outsized promotional roll off challenges should continue through at least [the fourth quarter of 2019],” Credit Suisse wrote, “while Dish's losses should moderate in [third quarter] and beyond unless they engage in more distribution renewal fights.”