DISH Network (DISH) Q3 2016 Results - Earnings Call Transcript

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About: DISH Network Corporation (DISH)
by: SA Transcripts

DISH Network Corp. (NASDAQ:DISH) Q3 2016 Earnings Call November 9, 2016 12:00 PM ET

Executives

R. Stanton Dodge - DISH Network Corp.

Charles William Ergen - DISH Network Corp.

Roger Lynch - DISH Network Corp.

Thomas A. Cullen - DISH Network Corp.

Steven E. Swain - DISH Network Corp.

Analysts

Walter Piecyk - BTIG LLC

Rich Greenfield - BTIG LLC

Amy Yong - Macquarie Capital (NYSE:USA), Inc.

Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC

Bryan Kraft - Deutsche Bank Securities, Inc.

John Christopher Hodulik - UBS Securities LLC

Marci L. Ryvicker - Wells Fargo Securities LLC

Jonathan Chaplin - New Street Research LLP (US)

Mike L. McCormack - Jefferies LLC

Ric H. Prentiss - Raymond James & Associates, Inc.

Kannan Venkateshwar - Barclays Capital, Inc.

Scott Moritz - Bloomberg News

Shalini Ramachandran - The Wall Street Journal

Malathi Nayak - Reuters

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the DISH Network Corporation Q3 2016 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this call is being recorded Wednesday, November 9, 2016.

I would now like to turn the call over to Stanton Dodge. Please go ahead, sir.

R. Stanton Dodge - DISH Network Corp.

Thanks, Jose, and thank you all for joining us. I'm Stan Dodge, General Counsel at DISH Network. And Jason is actually out today. I'm joined today by Charlie Ergen, our Chairman and CEO; Erik Carlson, our President and COO; Tom Cullen, EVP of Corporate Development; Roger Lynch, CEO Sling TV; Bernie Han, EVP; Steve Swain, our CFO; and Paul Orban, our Chief Accounting Officer.

Before we open it up for Q&A, we need to do our Safe Harbor disclosures. We ask that media representatives not identify participants or their firms in your report. We also do not allow audio-taping and ask that you respect that.

All statements we make during this call that are not statements of historical fact constitute forward-looking statements which involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by such forward-looking statements. For a list of those factors, please refer to the front of our 10-Q.

All cautionary statements that we make during this call should be understood as being applicable to any forward-looking statements that we make wherever they appear. You should carefully consider the risks described in our reports and should not place undue reliance on any forward-looking statements which we assume no responsibility for updating.

As part of the process for the broadcast incentive auction, we filed an application to potentially participate as a bidder for those spectrum assets. Because of the FCC's anti-collusion rules, we're not able to discuss what, if any, spectrum resources we may intend to bid on, and we will not be answering any questions about the incentive auction during today's call.

Operator, we will now open the call up first for analyst Q&A and then media Q&A.

Question-and-Answer Session

Operator

Thank you. And our first question comes from the line of Walter Piecyk of BTIG. Please proceed with your question.

Walter Piecyk - BTIG LLC

Thanks, Charlie. Can you comment on if you have any – if the company is going to make any filings on the AT&T/Time Warner deal, or if you have any personal opinions on whether you think that's a deal that should get approved by the government or even reviewed by the FCC? Thanks. And then I think, Rich, has a follow-up.

Charles William Ergen - DISH Network Corp.

Yeah, we haven't looked – obviously, they haven't filed all their stuff, so obviously we're going to look at that. It's going to be a big deal, and we're certainly going to have some concerns. But we don't file just to file against stuff, if it is obsolete, you've got to go through whether there's harm to consumers or whether it violates anti-trust laws or whether if it could be approved, could there be conditions. So we'll take a look at all that stuff and respond appropriately when we have all the facts.

But we are anyhow – just as a sideline, we already have concerns with AT&T and potentially with DIRECTV NOW where they're working a zero rate on their AT&T system, but they won't necessarily let other providers, whether it be Sony Vue or Sling or Netflix or whatever, be zero rated on their systems. So we think that's a violation of where net neutrality is today. So we'll take a look at all that at the appropriate time.

Walter Piecyk - BTIG LLC

(4:10) Don't you think the whole zero rating thing...

Charles William Ergen - DISH Network Corp.

Don't...

Walter Piecyk - BTIG LLC

I'm sorry. I'm sorry. I was just wondering...

Charles William Ergen - DISH Network Corp.

Go ahead. Sorry.

Walter Piecyk - BTIG LLC

Don't you think zero rating is kind of off the table now that we have a new President-elect?

Charles William Ergen - DISH Network Corp.

That I don't know, but it's...

Walter Piecyk - BTIG LLC

Okay.

Charles William Ergen - DISH Network Corp.

... it's possible that – it certainly is possible that with the election and with the leadership in Congress that all of net neutrality might get another look. That's certainly possible.

Rich Greenfield - BTIG LLC

And then just looking at two issues, one on Sling. Obviously, Sling needs access to endpoint consumers, and net neutrality has been a key part of your strategy or in getting access along with Netflix. I'm just curious to the extent that the Trump team has spoken very negatively about net neutrality, does that change the focus of how you think about Sling or how you go about Sling? And then just any update on the Flex Pack that you launched. Was that a material benefit to the quarter in terms of people opting for lower price, smaller packages?

Charles William Ergen - DISH Network Corp.

Yeah. So I'll take the first part. I mean obviously, I think that you could – obviously – one of the things you always worry about is – as the CEO is that Washington is something you don't really have much control over and Washington does make decisions and they pick winners and losers and so I think you have to be pretty flexible as a company to deal with that. Obviously, there's a – we think there's positive demand for services like Sling and Netflix and I think that there is – that's going to have a place in the marketplace probably no matter what happens but depending on how – depending on what regulation or not regulation there is might be depending on just may be a scale of how big that's going to be.

Positive of that is we're hedged on the linear side of the business. The Flex Pack is just to give customers more choice as people get more choice with over-the-top services, it's imperative that linear TV also offer choices to people. And that it tries to get as many of the advantages as over-the-top has as it possibly can. And Flex, it's more of a retention marketing tool than anything else. And the customers are increasingly saying we just can't afford to pay over $100 for video every month particularly for channels we don't watch. And are there other things we can do?

And rather than to just give credits to somebody which is what the norm in our industry is just to hold onto a customer so you don't have to report churn, it's better to put them into a package to right size them. So it's a strategy around that more than anything else. And I think from that perspective, it's a good strategic thing for customers. And it helps us financially and it will help us on churn. You didn't see so much of it in the third quarter because probably the biggest factor was Tribune where you had kind of a one-off event for almost the entire quarter.

Operator

Our next question comes from the line of Amy Yong of Macquarie. Please proceed with your question. Hello, Amy. Your line is open. Please proceed with your questions.

Amy Yong - Macquarie Capital (USA), Inc.

Thanks. Can you hear me?

Charles William Ergen - DISH Network Corp.

Yeah.

Amy Yong - Macquarie Capital (USA), Inc.

So one for Charlie and I guess one for Roger. First, Roger, on the Sling TV, can you talk about how big the market is to support services like Sling TV and DIRECTV NOW? What are your thoughts on the competitive landscape as you position Flex Pack, Blue and Orange? And I guess, Charlie, as you think about cable perhaps entering into the wireless industry, how does that change your opinion at all on your spectrum? Thank you.

Roger Lynch - DISH Network Corp.

Do you want me to start?

Charles William Ergen - DISH Network Corp.

Yeah, go ahead.

Roger Lynch - DISH Network Corp.

Okay. This is Roger, Amy. On Sling, when we launched the service, we were focused on initially cord-cutters and cord-nevers and cord cutting is a trend that we think has been going on for several years. There were about 25 million households in the U.S. who didn't have pay TV. So that was our initial market. As we've added more content and more devices, then we started to broaden the target market to go after people who are currently leaving the traditional pay TV ecosystem. So I think to answer your question, I'd say, it's a growing market. And it is a market that taps into some other growth segments like use of over-the-air antennas which is a growing market, broadband-only households, which is a growing market, other streaming services like Netflix, which is a growing market.

So if I were to predict what would happen at a large scale over time, I'd say that we should end up if you count services like Sling and Sony and DIRECTV's service, they're going to launch DIRECTV NOW as part of the pay TV ecosystem, I would expect it will end up with more pay TV subscribers over time, but they'll just be in different packages that give consumers more choice which I think is really what they're looking for and one of the headwinds against traditional pay TV today.

Charles William Ergen - DISH Network Corp.

This is Charlie. In terms of cable and what they might do in wireless, this would only be speculation on my part, but I think obviously they've looked at it. Clearly, it looks like at least one company made a deposit in the auction. And I think the AT&T potential acquisition of Time Warner probably makes them look at it a little bit more, because ultimately you're probably going to need – the world is going to – the world is looking at connectivity. And wire and wireless is part of that and to be successful, you're going to need a couple critical things. Certainly, you're going to need wireless spectrum to be in that business. You're certainly going to need scale in video which – so AT&T has both those things, and then you need a network and AT&T has that. And AT&T will have more scale in video potentially.

So that becomes bit of a threat to some incumbents around the country, and it also becomes a threat to people who maybe don't have scale in video but have wireless spectrum and a network. So DISH is uniquely positioned in that we have wireless spectrum and we have scale in video but we don't have a network. So you can imagine all the interesting things that might take place once this current auction is over.

If somebody puts all the pieces together and AT&T is on the path to do that, that makes it tougher – people on the sidelines have to do something different. In other words you can't remain on the – well, you can remain on the sidelines but that might be malpractice.

Amy Yong - Macquarie Capital (USA), Inc.

Thank you.

Operator

Our next question comes from the line of Ben Swinburne with Morgan Stanley. Please proceed with your question.

Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC

Thank you. Good morning. I think Tom is on the call. If he is, I'd love to get an update just on sort of chipset handset developments in the ecosystem around wireless. I think you were expecting or maybe we were expecting some fourth quarter chipset shipments around chips that included all the bands or most of the bands that your spectrum sits. And just any update on what's happened in the marketplace so we can think about 2017 and sort of the technology path around spectrum.

Thomas A. Cullen - DISH Network Corp.

Yeah, Ben. This is Tom. It's our understanding – well, we know that Qualcomm is shipping a band 66 chipset that has the 70X90 configuration. And I believe Intel is on the path to do that as well. And it's our understanding that the recently released LG V20 phone that I think was launched in the U.S. about two weeks ago also supports the 70X90 band 66 configuration. So that's the first step and it's our expectation that more Android devices will start adopting that in 2017. Uncertain as to what the timing and roadmap would be for iOS.

Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC

Very helpful. And just going back to Sling...

Thomas A. Cullen - DISH Network Corp.

And I would just...

Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC

Sorry, go ahead.

Thomas A. Cullen - DISH Network Corp.

Excuse me, Ben. I would assume that, that somewhat will dovetail with the wide-scale deployment of AWS-3 whenever that occurs by those holders of AWS-3 spectrum that purchased it last year.

Charles William Ergen - DISH Network Corp.

Yeah. Ben, this is Charlie. I mean, I think it's likely that our band 66 will be in handsets before we'd have a network or somebody – before there would be a network from us. But there will be other people who build AWS-3 out over the next year or two. And that's critical because you – it doesn't do you any good to have a work and then no handset that can receive it. So you would like to have a year or two of handsets out there before something on your network got turned on.

Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC

Right. Make sense. And then just coming back to Sling, Roger, I'm sure you thought through sort of DIRECTV NOW and how that may or may not be positioned in the marketplace. How do you think about Sling competitively with Now? And do you think you're attacking similar parts of the market? And any color on the quarter in terms of mix between the Orange, Blue or the combo tier, which looks pretty compelling even if it is a little less skinny.

Roger Lynch - DISH Network Corp.

Yeah. Well, obviously, we're waiting to see what DIRECTV NOW ends up launching with. But it sounds like it'll be a pretty full bundle with 100 channels that I would expect would go after the traditional pay TV ecosystem and probably something like Sony Vue, which is also a bigger bundle. It's a different strategy than we pursued from the beginning. Our strategy was never to recreate that big bundle. It was to try to create a lot more consumer choice, and that's what we do with something like Sling Orange, which starts at $20 and then you can just add channels that you want.

In terms of mix, we're seeing momentum, frankly, with all of our packages: Sling Orange, Sling Blue and people who take both. So I think it's – I think we've been able to construct our packages in a way that gives consumers choice and we're seeing them choose all of the above.

Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC

Thank you.

Operator

Our next question comes from the line of Bryan Kraft with Deutsche Bank. Please proceed with your question.

Bryan Kraft - Deutsche Bank Securities, Inc.

Hi. Good morning. Wanted to ask you a couple of questions. First, if you could update us on the Designated Entity case, where that stands and what you expect as far as timing on a ruling as well as what might happen after the ruling in terms of appeals, et cetera. And I guess I just wanted to follow up on the last question too. Just on DIRECTV NOW specifically on the pricing, I mean at $35, it's priced at about $5 below Sling Orange plus Blue for I think about 2x the number of channels. And just whether you think that you might have to do something different in terms of structuring the tiers for pricing. And also on Sling, can you help us just to understand your cost position on the CDN side, what your total cost of – you probably won't want to quantify it but just to help us understand whether you may be at an advantage or disadvantage to others in the space on your streaming costs? Thank you.

R. Stanton Dodge - DISH Network Corp.

Hey, Bryan, this is Stanton. On your first question about the DE case, it's fully briefed and it's been argued in the DC Circuit and we would expect an opinion from them probably the first half of next year, although difficult to predict. And as to any potential result, it's really impossible to predict.

Bryan Kraft - Deutsche Bank Securities, Inc.

Okay. And either side could appeal or – I'm sorry.

R. Stanton Dodge - DISH Network Corp.

Sorry?

Bryan Kraft - Deutsche Bank Securities, Inc.

Either side could appeal the ruling if they're not happy with it?

R. Stanton Dodge - DISH Network Corp.

Sure. You could seek a rehearing en banc at the DC Circuit or you could file a petition for cert at the Supreme Court.

Bryan Kraft - Deutsche Bank Securities, Inc.

Okay. Thank you.

Charles William Ergen - DISH Network Corp.

Okay. Bryan, just on your Sling questions. Well, first of all, on DIRECTV NOW, we haven't seen the channel package that they're going with. And so 100 channels is a lot of channels but are they channels that people care about and are they channels that people are willing to pay more for? If you think about the Sling Orange package, it's $20, so $35 is 75% higher price for it. There are a lot more channels and if they're all channels that people value, then it'll be good value and I'm sure it'll be a popular package but we haven't seen it yet. So I can't really comment on that or whether it would cause us to rethink how we do our packaging. In general, we're very pleased with how we do our packaging because it really, really embraces consumer choice rather than just saying you've got to buy all these channels.

In terms of CDN costs, this is – in my career I've been buying bandwidth for 17 years or 18 years and every year the cost of bandwidth drops and drops and drops significantly. And that's been the case also with CDN costs. So to the point where four years, five years ago, it would have been a material cost in the operation of a business like Sling, and today, it's not immaterial but it is not a cost that we worry about because those costs have continued to come down so significantly. And I think we get – because of the volume that we stream, we stream a – because our customers watch a lot of television, I think we get quite good pricing on CDN.

Bryan Kraft - Deutsche Bank Securities, Inc.

Okay, great. Thank you.

Operator

Our next question comes from the line of John Hodulik of UBS. Please proceed with your question.

John Christopher Hodulik - UBS Securities LLC

Thanks. Maybe just a broader question. How do you see the live OTT market evolving over time? I mean how big as a percentage of traditional multichannel distribution or multichannel video product could it get? And is there enough room for not just Sling and DIRECTV NOW, but all the other guys that are lining up to enter – Hulu, maybe YouTube, maybe Amazon? Just your view on how you see the competitive landscape over time would be great.

Charles William Ergen - DISH Network Corp.

I think that OTT in general has the potential to be as big or bigger than the DBS business, right? It's the next way to watch live TV, right? Cable, then satellite and now, OTT because it has some built-in advantages, right? It's immediate. It's just an app so you don't have to wait for an installer. You don't have two-year contracts. You can watch on any device. The advertising can be more meaningful to you. It can be more directed to you. So there's a lot of different things you can do with it. And you can have everything stored in the cloud so you don't really need a DVR because you can have network DVR and you can have start-over and then it just – it can be a much simpler user experience. So there's a lot of built-in advantages in terms of where OTT can go. That's the positive. The danger is that the ecosystem ends up so chopped up that it's truly an à la carte experience. The barrier-to-entry are not great, right? So pretty much anybody could enter into the marketplace. So, there's a lot of technical things you've got to do and there's some capital and so forth. But there's certainly big guys, big companies that could enter the business.

But for example, not everybody maybe wants sports, right? So that if you're – I imagine Viacom would sell to anybody whether they had sports or not. So there's going to be packages with no sports. That means that people – it gets to where people like football, they may watch September, October, November. They may watch the football and then they may drop that service and go to somebody who doesn't have sports in February, March, April, May, June, right? Or they may like hockey and watch that for four months out of the year.

So you're going to – and it's pretty easy to switch providers, right? You just push a button. So it's not like you got to wait for an installer and learn a new operating system and lose all your DVR functionality. So I've always been concerned that the content creators are going to end up in a place that's maybe not so good for them. But it should be good for consumers. So the business will definitely grow.

So that's kind of the landscape, we don't know. We know there's seasonality to it. We know that the churn can be high one month and low one month. We know that people can come in for a big event and then drop out the next month. We know that people like HBO, you can come in for Game of Thrones and then six weeks later drop out, or you can binge-view and drop out. And then you wait for the next year Game of Thrones, because that's the only thing on HBO you watch, right?

So it's an interesting, interesting business. And we'll have to see how it all transacts and how people strategically do it. But it does have some risk that it's going to be disruptive to the marketplace for at least a period of time until people sort it out. Having said that, Roger's now in his seventh year doing this. There's a lot of things that we put in place for depending on which way it goes and we've maintained the flexibility that we need here and the technology is not so easy to duplicate overnight. And so we think we're positioned in whatever direction it goes. But we just don't know, right?

As Roger said, there's some momentum in the business. I would expect that with DIRECTV coming in, the momentum for the – at least for the segment will grow. And we'll see what happens.

John Christopher Hodulik - UBS Securities LLC

Great. Thanks.

Operator

Our next question comes from the line of Marci Ryvicker of Wells Fargo. Please proceed with your question.

Marci L. Ryvicker - Wells Fargo Securities LLC

Thanks. I have two. First, Charlie, I am curious as to your thoughts on AT&T buying Time Warner in general because it is a change in strategy. There is not a lot of synergy, if at all. So what do you think it says about the wireless business in general? And presumably you're going to enter the wireless business, so does it make you more nervous?

And then the second question has to do with Sling. I think you said at one point that you are paying the same rate for the programmers for Sling as you do for the linear channels. Is that still the case, or are there some channels where you pay more and some where you pay less? Thanks.

Charles William Ergen - DISH Network Corp.

Well, I don't think we'll get into how much we pay for channels but obviously we look at our business holistically when we do transactions. I mean we don't just pick one piece or the other. So we look at it and we have scale and we look at everything. AT&T, I think, AT&T has talked about some of their logic. There was obviously some logic to their purchase – acquisition of DIRECTV. This is another step to get content and maybe control that a little bit more and be a bigger player there.

Time Warner is a good company. They're very profitable. If it's potentially accretive to what they're doing, it could make sense. In and by itself from a financial basis, it could make sense regardless of whether there was any synergy or strategy to it. So you'd have to ask them as to why they're doing it, why they're doing it. But they clearly still have a good wireless business and everybody is going to have a different strategy in terms of going forward. It's interesting. It's a different dynamic and it will put some pressure on some of the other incumbents.

Marci L. Ryvicker - Wells Fargo Securities LLC

Got it. Thank you.

Operator

Our next question comes from the line of Jonathan Chaplin of New Street Research. Please proceed with your question.

Jonathan Chaplin - New Street Research LLP (US)

Thanks. I had two quick questions. One, now that Sling's becoming a really meaningful part of the business, I am wondering if you can give us some color on how many subscribers you have got on Sling at this point. And if not, at what point you will start giving us a breakout of the old traditional business versus Sling.

And then my second question was, I think you are in an uncommon position to understand what the over-the-top business is doing to networks in general. And I am wondering if you've got any data from your users on when people adopt Sling, how much it increases their data traffic. How much of that is consumed over mobile versus on television sets? And what do you think that does for network congestion in general and for spectrum demand?

Charles William Ergen - DISH Network Corp.

Steve, you want to take the question?

Steven E. Swain - DISH Network Corp.

Yeah, sure. So as far as Sling subs and DBS subs, last year, we explained our thought process on reporting DBS and Sling subs together. So we won't re-explain that logic again. We do, however, revisit that decision every quarter. So we won't elaborate further, but that is something we come back to every quarter.

Jonathan Chaplin - New Street Research LLP (US)

Roger, is the...

Charles William Ergen - DISH Network Corp.

And the...

Jonathan Chaplin - New Street Research LLP (US)

... press estimate of 1 million subs plausible on Sling?

Charles William Ergen - DISH Network Corp.

We're not going to really comment on that.

Roger Lynch - DISH Network Corp.

Okay. Hey Jonathan, this is Roger. I'll...

Charles William Ergen - DISH Network Corp.

By the way, we're not trying to hide any – I mean we're not trying to hide anything there. There'll be a time to report it when it makes sense for us. But you can look at the – I don't know, what's that metric that comes out that shows the kind of pecking order where people...

Roger Lynch - DISH Network Corp.

Parks Associates. You talking about the...

Charles William Ergen - DISH Network Corp.

Yeah, Parks Associates. Sling moved from number 10 to number 6, I think...

Roger Lynch - DISH Network Corp.

Yeah.

Charles William Ergen - DISH Network Corp.

...over last year behind...

Roger Lynch - DISH Network Corp.

Of streaming services. Yeah, the top five stayed the same and then Sling moved from 10 to 6.

Charles William Ergen - DISH Network Corp.

So there's some momentum there, anyway.

Roger Lynch - DISH Network Corp.

Jonathan, as far as what it's doing to networks, I assume you're talking about broadband networks because you asked about...

Jonathan Chaplin - New Street Research LLP (US)

Yeah, exactly. Broadband networks both wired and wireless.

Roger Lynch - DISH Network Corp.

Yeah. Well, I mean, similar to my earlier comment about the cost of bandwidths going down, the amount of bandwidths available on these networks has been growing very, very significantly. And so we know the mobile networks are – the spectrum is more scarce than bandwidth that's available over wireline networks today. But generally, the way we think about mobile is, it's really important to our business because of the utility that people get by being able to watch all of their channels on Sling wherever they go. So we don't have a distinction of are you in the home, are you out of the home? Is this on a set-top box or not? It's just all of your channels are available wherever you go. So that's important for us because it's a way that we activate customers by advertising on mobile devices and then getting people to download the app, do a free trial, start streaming.

But ultimately, the majority of viewing happens on a TV set because the hours per session on a TV set are much longer than the hours per session or minutes per session on a mobile device. But that shouldn't be an indication that mobile is not important. It's quite important.

And in terms of what does it do to the networks themselves? What we see is the majority of viewing on mobile devices happens over Wi-Fi networks. We are starting to see shifts in that because you see competitors in the mobile space like T-Mobile or Sprint, which are embracing unlimited data services. And we certainly have seen the amount of mobile streaming go up with services like that. And T-Mobile when they launched Binge On, we saw viewing go up on that. So I would expect over time us to see more and more mobile viewing as that market competes on unlimited data.

Jonathan Chaplin - New Street Research LLP (US)

Got it. Thanks.

Operator

Our next question comes from the line of Mike McCormack of Jefferies. Please proceed with your question.

Mike L. McCormack - Jefferies LLC

Hey, guys. Thanks. Maybe just a comment on what you are seeing out there as far as cord-cutting goes, anything you can size for us there. Also, perhaps a comment on any migrations you are seeing from linear over to Sling within your own business. And then, finally, if you don't mind, just on the linear side your view on pricing flexibility.

Charles William Ergen - DISH Network Corp.

Yeah, this is Charlie. I'd say, general trends, we don't see a lot of cord-cutting from DISH to Sling, primarily because the way Roger explained it to an earlier question, it's a little bit different product. It's not really appealing to a guy who wants to watch a lot of stuff. It skews younger and people who are cord-nevers or have already cut the cord somewhere else. There's a few, but it's not a lot.

We do see a growing trend to cord-cutting. It ranges from people totally cutting the cord and just watching network TV with Hopper antenna to maybe adding Hulu or Netflix or Amazon or a combination of those to people who add Sony Vue or Sling or maybe now DIRECTV NOW. So there's a way for people to cut their bill and still get enough viewing to satisfy their need. If you really need a channel, you can go to a bar or restaurant, your neighbor's house. My kids will come to my house if they really want to watch something.

So the customer has a lot of choice. It's very competitive. The customer has a lot of choice. And I think it's going be something people – there's going to be a transition, just like there has been from a landline for a phone to wireless. And that transition is going to take place over the next 20 years, and it's going to be – how fast it goes and whether it accelerates is anybody – it hasn't really accelerated yet, I mean like you had the hockey stick hasn't kind of taken off yet. It's still kind of a slow burn, so to speak, but we expect that it might accelerate at some point in time, particularly with – as other people – as Hulu comes to market, AT&T comes to market, that might have some acceleration. And if there's acceleration, then the whole world has to respond.

So what we've done at DISH is we have a collection of assets that we think are in a position to respond to pretty much anything that happens, right? We've got scale in video. We've got technology in an OTT service that we've got a user interface and a technical interface, and now we know how to do dynamic ad insertion and we're going to know how to do network DVR. We know how to do digital set-top boxes. We know how to do billing. We know how to do an in-home installation and service and dispatch, and we have virgin nationwide sweet spot spectrum that can be used for connectivity and Internet of Things and so forth. And I think for us the strategy – we don't know the answer to this but the strategy is how do those assets get put to use to their maximum value for our shareholders? And to some degree, I say this many times, we're a mid-size communications company, so we don't exactly get to make all those decisions. Sometimes the decision is going to be made because somebody else is going do something strategic that then opens up an opportunity for us to do something that we didn't know exists, or somebody does something that changes the paradigm that forces companies to talk together that didn't talk together before and that kind of stuff.

So I think we have a lot of assets, and obviously we've got to put them to the best use that we possibly can. Today, that's DISH doing what we're doing. Obviously, that potentially can change. An AT&T, Time Warner merger might be a change element, might be a catalyst to change, right? So we'll see.

Mike L. McCormack - Jefferies LLC

And then just talking about pricing flexibility?

Charles William Ergen - DISH Network Corp.

Pricing flexibility, I think is – I think on the linear side, it's becoming more difficult, right? There's still room for us. We're still kind of lowest-cost guys out there. We still skew a little bit more rural where it's a little bit less competitive, so we still have a little bit of pricing power, but I think that the pricing power probably at best would make up for the price increases you're seeing from the content providers. So it's going be a margin business that's going to fight some inertia. We're a little bit more fortunate than most, but it's still – there's going to become a limit to what the content providers can do on price increases. There's going to be a limit – there's starting to be a limit now we're seeing on. We learned a lot with the Tribune takedown and there's starting to be a limit on maybe retrans fees and things like that because customers start finding alternatives at some price. So I don't know if we're there yet or not, but we're pretty close.

Mike L. McCormack - Jefferies LLC

Great. Thanks, Charlie.

Operator

Our next question comes from the line of Ric Prentiss of Raymond James. Please proceed with your question.

Ric H. Prentiss - Raymond James & Associates, Inc.

Thanks for taking my question. A lot of discussion on high throughput satellites. How do you view the increasing capacity coming online here over the next couple of quarters to years, and how it's going to affect your business? Any concerns on the launch schedule changes? And maybe a longer-term question, it seems to us that, given the change of pace in technology, possibly satellite should be looked at as maybe a shorter lifetime and cheaper costs. But just wondered your thoughts on the whole high throughput satellite industry and what's going on, and how it would affect you guys.

Charles William Ergen - DISH Network Corp.

This is Charlie, and it's probably a better question for all the EchoStar folks but I'll speak to it as it relates to DISH. We're indirectly involved with high throughput satellite because of satellite broadband which we sell and obviously the launch of both Hughes and ViaSat, both have high throughput satellites. They're going to focus – it'll be beamed on the United States which will open up a lot of capacity which will do two things. One, it hopefully will reduce churn in that category so we can give people more bandwidth. And it opens up more opportunity to sell those – sell more units where we have – where today many beams are closed on both of those providers today. So in part – and the vast majority of the country today, we can't put in satellite broadband even if we wanted to because we don't have the capacity on the satellites to do it. So high throughput satellites make satellite broadband more economical, so I think that's a positive for our business. I'm sure it's a positive for their business. And that's the way it directly affects us.

From a video perspective, we're the first guys to do spot beams. And that really helps at the local and some other things. It gives you some more bandwidth to do some different things in advertising potentially where you can start storing advertising on people's hard drives and the advertising model gets better. So there's some peripheral things that satellite technology are helping with. But high throughput satellites are going have probably a bigger impact for the ViaSats and the Hughes of the world as that technology expands around the world, and as it starts connecting ships and planes and other mobility sites in a way that they were never connected before. In other words, you're going to be flying around the world and you're going to be connected and you're going to have full streaming of video just like you do in your home. And that's going be a – that's probably going to be a high throughput satellite product.

Ric H. Prentiss - Raymond James & Associates, Inc.

Right. And...

R. Stanton Dodge - DISH Network Corp.

Operator, we'll take -sorry. Is there a follow-up?

Ric H. Prentiss - Raymond James & Associates, Inc.

Yeah, just wondering any thoughts on – the satellites used to go up for 15 years, 20 years, but the pace of technology seems to be changing fast as you guys are trying to change your model too.

Charles William Ergen - DISH Network Corp.

Well, it's a little bit off the subject for DISH but I mean I do believe that the lower – that some of the companies are working on lower satellites and thousands of satellites that have a life span of two years, three years but that's going to have a place in the world of connectivity. Because there's low latency and you can change them out and the cost of launches go down as soon as you can reuse rockets, which a couple companies are doing now. So that's a paradigm shift on that. And then I think the industry is struggling with the fact, do you build a 15-year satellite for hundreds of millions of dollars? Or do you build satellites for a lot less expensive, they last three years, four years, five years? And that was never an option before because the cost of the launch was so great. But as the cost of launch has come down, if you can reuse rockets, I think you could make the leap, right, that there is a paradigm shift to smaller, faster builds, more launches, more satellites in the future whether it be LEOs, MEOs or GEOs.

Ric H. Prentiss - Raymond James & Associates, Inc.

Very helpful. Thanks.

R. Stanton Dodge - DISH Network Corp.

And operator, we'll take one more question from the analysts and then we'll switch to media Q&A.

Operator

Very well. We will now take our final question from the analyst community. Our final analyst question comes from the line of Kannan Venkateshwar of Barclays. Please proceed with your question.

Kannan Venkateshwar - Barclays Capital, Inc.

Thank you. Just a couple from me. The first on your beef (40:12) during the Tribune dispute as well as earlier disputes. You guys had a little bit of an experiment in a way distributing free antennas. Just wanted to understand what the experience with that was. And you've also seen the number of antenna-only homes in the U.S. grow over the last maybe year and a half or so at a faster pace. How do you guys think about that as an opportunity potentially from a cost perspective for the legacy business?

Charles William Ergen - DISH Network Corp.

Well, I mean we've done – our customers have Hopper antennas, they have for years. Some portion of our – it has grown and not so much for our customers but it's grown more for the cord-cutter who – look, you can read the blogs and see it every day where somebody gets Netflix and Hopper antenna and they are happy with that for their viewing needs. So it's not a big part of our business. We've done some of it. We certainly did it in the Tribune dispute. Many of those customers will remain satisfied and didn't come back to Tribune channels. But some of those customers weren't satisfied and they did come back. So it's a household by household kind of thing. I don't know that Hopper antennas are a replacement for the more traditional way of doing it that we and satellite and cable business do it unless retrans just got too high. There could be a breaking point where people will go through the pain of getting an Hopper antenna but we're not there yet. The vast majority won't do it yet.

Kannan Venkateshwar - Barclays Capital, Inc.

And just a follow-up on programming costs. So when we look at the subscriber-related expenses, obviously, that benefits as the net adds go down, but also, you guys had a few disputes and some of the channels were off. Going forward, when we look at that particular line item, is there any reason to expect that the trend line will continue to be low to mid single digits instead of what we have seen historically?

Charles William Ergen - DISH Network Corp.

I think it depends on when your programming contracts are up. But there remains pressure of higher prices in the linear television business, right? And that's going to change because you're going to – as you get into OTT and people have more choices and there ends up being more à la carte offerings, people are going to – in my opinion, will look to leave linear television because the price is too high and the bundle is too big, right? So you say why am I going to spend $120 for this when I can get it from this vendor or that vendor or I can switch seasonality between this vendor and this vendor or maybe I'll pay $60 a month during football season and maybe I'll pay $30 a month after football season. And I can switch between vendors and so it's going to put pressure on the other sides of the linear television business. And my only message to the content people is there's things we could do about it to make that content better and the environment richer for our customers but it involves things like changing the 16 minutes of commercials. It means we got to change things so we need to be able to do binge viewing for customers with the lower advertising load.

We need to have dynamic ads for customers that are more meaningful to the people. We have to make it a better product for people so they're willing to pay more for it. We have to make it more convenient product for them so they'll do it and not all linear content companies move that fast. But if you have a long-term contract, you don't really want to change it because you know you're going to get that amount of revenue for a period of time. So it takes a bit of a forward thinker on the content side to say let's change things now so that when we get to the end of that contract we're not in a situation where you take us down, right, or we lose your service because we don't have a product that people watch anymore, right?

And not to pick on anybody but Viacom and Sony that was just yesterday where Sony – I think Sony Vue announced that they were going eliminate all the 22 Viacom channels. Well, that means that a customer now can get a – that's a lower cost for Sony Vue, and if you don't watch a Viacom channel you have a different choice. And if you want Viacom channels, then maybe you're going to be able to go to DIRECTV NOW or Sling or somebody else. But if you don't want Viacom channels, you're going to have a choice now. You're not going to have to buy them. So that's a change and that's good for consumers but it's going to put pressure on all the content providers.

Kannan Venkateshwar - Barclays Capital, Inc.

Right. Thank you.

Operator

We will now take questions from members of the media. Our first media question comes from the line of Scott Moritz of Bloomberg. Please proceed with your question.

Scott Moritz - Bloomberg News

Great. Can you guys hear me?

Charles William Ergen - DISH Network Corp.

Yeah.

Scott Moritz - Bloomberg News

Great. Charlie, a question. I know we are only hours into this election results, but wanted to get your reaction. Over the years, you've described in these acquired assets toward a vision of having a next-generation video service. Do you see a Trump administration helping to advance that strategy or hinder it? And if so, why?

Charles William Ergen - DISH Network Corp.

Well, it's a little bit hard because obviously the – because the President-elect was not that specific on his policies and we don't know who the cabinet members and the regulators would be. But if I take a general look at it, I think the potential negative is just uncertainty and that ultimately is going to go away but that's going to be a negative for a while because we just don't know necessarily what the policies and the people who will be in charge of those policies would do.

Once that gets in place, that will dissipate to some degree. But the positives are, I don't think there's any question that the President-elect and the fact that the Republicans and the Republican leadership in the Congress that you're probably going to see bipartisan support for infrastructure. You're probably going to see a more rational tax code, particularly as it relates to corporate taxes and particularly as it relates to maybe bringing overseas money back which then can pay for infrastructure. So I think those are all potentially big positives for business in general. I think you're going to see lighter regulation, which I think could help GDP. Any time you have less regulation, you have a better chance for GDP growth. I think you have a chance now for maybe immigration reform and maybe some bipartisan support for immigration reform. That would be a positive for GDP. So you've got a lot of potential policy positives for business in general.

And then those companies where you might have CapEx, whether it be satellites or networks or connectivity in rural America or connectivity in inner cities or things like that, DISH is positioned in those areas should this administration decide to go that route, which I think there's a high likelihood they will because this was an election about people, it's always the have and have-nots, and the have-nots voted for Donald Trump. And so they don't have as much – rural America doesn't have as much connectivity, right? Inner city doesn't have as much. So those things we would expect to probably see some real initiatives there. And certainly, if you bring back billions of dollars from overseas, it's going to go into this economy here and that's going to – so we think there are some positives there.

Operator

Our next question comes from the line of Shalini Ramachandran of Wall Street Journal. Please proceed with your question.

Shalini Ramachandran - The Wall Street Journal

Thanks. Hi, guys. Just following up a little bit on Scott's question, specifically on how the Trump administration would affect net neutrality and potential deals. I was curious for your thoughts given that Trump has said that he would kill AT&T/Time Warner. I'm not sure – I don't think that those companies are taking that seriously at the moment, but I was curious for your thoughts specifically on those two points.

Charles William Ergen - DISH Network Corp.

Well, I think you always got to take seriously when somebody is running for president what – you have to take seriously what they say. But obviously, I think any candidate would reserve the right to change their mind if they had different facts that do it. So I think that the regulatory process there is probably as unknown as it was before the election. And I forget the first part.

R. Stanton Dodge - DISH Network Corp.

Net neutrality.

Charles William Ergen - DISH Network Corp.

Net neutrality. I think – in general, I think the Republican leadership, whether it be in the Congress or the executive branch, and potentially now in the Supreme Court, would have a lighter hand to regulation. And so you may see net neutrality be challenged or weakened going forward. But the American public also has come to make sure that – the American public, the same people that voted in the election are going to say I want my – I want to be treated fairly and I don't want to be gouged. And you're going see a balance there, I think.

Shalini Ramachandran - The Wall Street Journal

Got it. Thank you.

Operator

And our last question comes from the line of Malathi Nayak of Reuters. Please proceed with your question.

Malathi Nayak - Reuters

Hi. Thanks for taking my question. Just following up on that previous question, do you think, Charlie, that media industry consolidation faces a high risk under the Trump administration? Like what could happen to a potential CBS/Viacom deal or the AT&T/Time Warner deal?

Charles William Ergen - DISH Network Corp.

I mean that's the uncertainty part that I talked about. We just don't know until you see who's going to be heading up the Justice Department and who's going to be heading up the FCC. And in general, the Republicans would have a lighter regulatory and I think they're probably – in general, I think there's going to be more flexibility in M&A transactions, right? So I think you'll see more where it makes sense and where it doesn't harm the public interest and where it doesn't violate anti-trust laws, I think, people – my gut feels people today are looking at or not today maybe but once you have some certainty on the administration, people will then take a look at those policies and see what people say about it and maybe what their track records are and they'll, at that point, determine whether they think M&A is gotten – the regulation will be less or more or the same.

Malathi Nayak - Reuters

Got it. Let me ask one question...

Charles William Ergen - DISH Network Corp.

My get feels the regulation will be less but I don't think that's any breaking – I don't think that's any breaking news but I think the regulation will be less.

Malathi Nayak - Reuters

Got it. If I could ask Roger one question. In terms of your marketing initiatives with Sling TV, will we see a lot more investment on marketing the product now that there is going to be increased competition from, say, Hulu, and AT&T's upcoming services?

Roger Lynch - DISH Network Corp.

Yeah. We've already been ramping up our marketing ever since we launched. So it's not in response to competition or expected competition but more in response to when we feel we're ready to expand either because we have additional content or we have additional devices or we're going after new market that we weren't going after before. So you saw just in the last couple months we started with television advertising because we now feel like our product can appeal to a broader segment of the market than we could before we had all the devices that we're on and all the content that we have. So that ramp-up has already been happening and we're seeing good momentum from it.

Malathi Nayak - Reuters

Got it. Thank you.

R. Stanton Dodge - DISH Network Corp.

All right. Is that it? That's it.

Charles William Ergen - DISH Network Corp.

All right. Thanks, everybody. We'll be on in February. Bye.

Operator

Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your lines.