Almost a week ago after DISH Network released a $2 dividend for investors, their chairman and CEO Charlie Ergen stated that the company is trying to avoid heavy discounting of prices. He acknowledged that the discounts given correlated with the increase in their third quarter subscription gains. During a conference call after the Q3 results were released, he said, “I hate giving away programming. I hate the discounting we do today; in part it does cause you problems on the back end.”
In order to lure new subscribers, DISH introduced a $9.99 per month package that include 100 channels. This allowed the company to call itself the lowest satellite provider (over DirecTV). Ergen believes that because DISH is priced about $15 per month lower than its competition. This is the harbinger for undercutting companies. It is a slippery slope for companies because the more they drop prices, the less revenue they make per customer. He stated that they don’t want to get into a price war with a company like DirecTV. Ergen also said on the conference call that, “When that programming discount goes away, your churn is going to go up. Our focus will be to not get in at all, but when we are involved in it to be at the low end of the scale in discounting. I would be very scared to be higher than we are today.”
It is all a process. First you have to gain subscribers then you have the flexibility to do what you want with them once you gain their loyalty. I do like that Ergen is aggressive and doesn’t want DISH to become the Walmart of the satellite industry. This is the type of leadership you want in a company leader.
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