Talk about spin control. Today’s Dish Network earnings announcement touted that its profit doubled in the first quarter to $351 million, beating analysts’ estimates.
So, you think. Wow. How did that happen in today’s market in which streaming services are taking more and more market share from cable and satellite TV companies?
The answer: Profits may be up, but market share is down. You see, Dish actually lost 134,000 customers but only boosted its profits by increasing prices for its current customers. Now, that’s a fine way to fill the pockets of company execs.
But it speaks to what’s wrong at Dish and many other companies, whether they are in the TV delivery system business or not. When a company is public, beholden to shareholders, the future is simply the next quarter, not years down the road. So, to keep their jobs, CEOs enact short-term changes to ensure that the next quarter’s earnings look good.
Of course, it’s only a matter of time until that strategy catches up with them. Many floundering companies approach lost market share by raising prices (to increase profits) or laying off employees (to cut costs). In some cases, these may be needed adjustments to keep a company afloat.
Dish Network vs. DirecTV
But what stuns me is that there’s little effort to look beyond what’s happening in the next quarter. The important way Dish (and anyone else concerned with lost market share) can take back market share is to become more relevant to target audiences. For the long term.
My guess is that Dish isn’t just losing to Netflix, Hulu and Amazon. But also to DirecTV. You can sense it in Dish’s current marketing campaign, which says you get the same thing at DirecTV, only at a lower cost. (Although, based on Dish’s recent price increase, that may not be for long.)
The spots are defensive because they suggest that DirecTV is the market leader. But Dish and other companies need to know that switching for a lower cost isn’t a very strong switching trigger.
We’ve done research in various industries in which emotional reasons (and some rational ones) often trump low cost as the reasons why consumers choose. They don’t choose for the lowest cost because most of us believe you get what you pay for.
Dish isn’t going to stave off its lost market share by standing on low cost (while increasing prices) or showing off The Hopper, which is the same DVR technology that just about every cable and satellite TV company offers.
Even in light of Dish’s first quarter announcement, Dish is becoming less and less relevant, and its lost market share will catch up to its bottom line eventually. Saying you are the same as the market leader just says you aren’t good enough.