While Dish Network (Nasdaq: DISH) reported increased subscriber churn in the first quarter, executives told analysts Thursday that they expect its new Hopper DVR will help it improve retention and drive increased revenue from homes that take the product.
CEO Joseph Clayton said that Hopper is also attracting subscribers with better credit scores. "They buy more of our services and additional packages. I firmly believe churn will be lower as we move forward," Clayton added.
Dish averaged monthly subscriber churn of 1.47 percent in the first quarter, up from 1.35 percent in the same period last year.
Hopper contains a function called AutoHop that allows subscribers that activate it to automatically remove all of the commercials in primetime programs from ABC, CBS, Fox and NBC. Dish is waging a court battle against CBS, Fox and NBC, which asked a federal court in May 2012 to force it to disable the AutoHop function.
Dish chairman Charlie Ergen told analysts that the litigation with the broadcasters has hampered marketing efforts, since the networks refuse to air Dish commercials that tout the product. He said that has given DirecTV (Nasdaq: DTV), which sells a new multiroom DVR called Genie, a competitive advantage. "I think DirecTV does perhaps a better job from the marketing front," Ergen said.
Demand for Hopper DVRs contributed to Dish's subscriber related expenses increasing to $1.91 billion in the first quarter compared to $1.76 billion this time last year. But Clayton said Dish expects capital spending for Hopper to decrease as it buys more of the set-tops, which are manufactured by corporate sibling EchoStar.
"The product cost reductions, which come with longer time and greater volume, have not really kicked in yet, but they will as we move into the second half of the year, as the volume grows even greater," Clayton said. "So we see this is as a very positive sign to our business. But it does necessitate upfront spending and costs to generate this positive momentum," he added.
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