EchoStar has lost its "distant signals" case has rippled throughout the satellite TV pond, but what remains in the recent decision's wake may be what really leaves the company and its subs wet behind the ears. Beginning Dec. 1, approximately 800,000 DISH subscribers, or about seven percent of the company's entire customer base, will be impacted by U.S. District Judge William Dimitrouleas' decision in Fort Lauderdale late last week.
What's important to realize about the injunction, said Bernstein Research's Craig Moffett, is the ruling applies to both subs receiving the distant nets illegally and legally. Dimitrouleas' decision rejects a previous settlement between EchoStar and broadcasters, and by doing so has indicated that the company's repeated violations of the distant net laws require the revocation of all rights to offer the signals. Basically what the judge has done is to say it doesn't matter that EchoStar reached an agreement with the broadcasters, only that the company has openly violated the law, he said.
"Over the nine year course of the litigation, EchoStar was able to reach settlements with seven of the eight plaintiffs, representing approximately 90 percent of all television network stations in the United States," EchoStar said in a statement. "We are disappointed the judge concluded that given the statutory language he was required to ignore those settlements and impose the injunction."
Moffett said barring a stay from the Supreme Court, or an "improbable" intervention from Congress, there will be two likely results: a loss of revenue and increase risk of churn.
"The lost revenue associated with the distant signals package (is) approximately $50 million per year ($5 per month per subscriber)," the analyst said. And the risk of higher churn becomes a looming reality as customers turn to their alternative options for pay TV - namely "cable, using an over-the-air antenna, or DIRECTV. If a quarter of the customers (i.e. 200,000) were to leave over the next six months, the impact would amount to approximately 25 bps of additional churn monthly."
Moffett also said DIRECTV is likely to be the biggest beneficiary since the customers that are affected are "overwhelmingly rural" where in most cases, cable is not an option.
The analyst did say, however, that it is not certain customers will abandon DISH. "Ironically, it is the legal distant signals customers who are most at risk since the channels they lose will be legally available from competitors," Moffett said. "For the illegal customers, there is likely no benefit to going somewhere else since the illegal channels won't be available elsewhere, either."
EchoStar has lost its "distant signals"
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