* Customers can turn to online sources for AMC-Ergen
* Clearwire shares rise on Dish investment speculation
* Second-quarter revenue, net income miss Street
* Dish "cautiously optimistic" about Q3 subscriber growth
By Liana B. Baker
Aug 8 Dish Network Corp Chairman
Charlie Ergen says customers missing AMC Networks programs
during a prolonged blackout of its service should turn to
Apple's iTunes or Netflix to get their "Mad
Men" and "Breaking Bad" fix.
The billionaire's pointed comments came as Dish, the
nation's second-largest satellite operator, reported
weaker-than-expected second quarter revenue and earnings, and
disclosed a potential furthering of its wireless ambitions with
a new investment in a telecommunications company.
Dish said in a filing on Wednesday that it made a roughly
$400 million strategic investment in debt securities of an
unnamed "single issuer" that needed capital to meet its
financial obligations beyond the next 12 months. Wells Fargo
analyst Jennifer Fritzsche said there was speculation that
Dish's investment was in wireless service provider Clearwire
Clearwire said on July 26 is has enough funding to last at
least 12 months.
Both Ergen and a Clearwire representative declined to
comment when asked specifically about the investment.
Still, the speculation was enough to send Clearwire shares
up 16 percent, of 24 cents, to $1.74 in afternoon trading
Dish has spent nearly $3 billion on wireless spectrum and
assets but cannot move forward with building a wireless network
until it gains approval from the U.S. Federal Communications
Commission. On an earnings call, the company gave few new
details about its plans for the spectrum beyond saying that it
expects a favorable resolution to come from the FCC in "the next
After a dispute over programming fees, Dish dropped AMC
Networks, home of the "Breaking Bad" and "Mad Men" TV
shows, on July 1. Dish Chief Executive Joe Clayton said on
Wednesday that Dish would lose some subscribers in the third
quarter because of the AMC removal but said the turnover was
Clayton said he was cautiously optimistic about Dish's
subscriber growth in the third quarter, adding that the company
would do better than it did in last year's third-quarter, "just
like we did better in the second quarter of this year compared
Ergen said Dish would be interested in paying for AMC on
its own, without the other channels that come along with it,
including WE, IFC and Sundance.
"AMC as a standalone could make more sense but that's not
anything that's been offered to us," he said.
Ergen spoke at length about changing TV viewing habits and
how some of AMC's critically acclaimed series are "available to
our consumers on an a la carte basis through iTunes or Amazon
." He joked that it would be cheaper for Dish to pay for
its subscribers to watch "Mad Men" on iTunes then to pay what
AMC was asking in a new contract and then pass on the cost to
Dish subscribers who don't watch the network.
"The world is changing and you're not going to have
everybody having every program out there, and you're certainly
not going to get programs that are readily available on other
networks or readily available on the Internet," he said.
Despite the lengthy standoff, Brean Murray analyst Todd
Mitchell said he expects the companies to reach a resolution
"AMC needs Dish's distribution and Dish will distribute
anything it can get a decent price for," he said.
AMC Networks declined to comment. AMC, along with its
former parent company, Cablevision, has also sued Dish
for $2.5 billion in damages, alleging improper termination of a
15-year contract with an AMC unit called VOOM HD.
Dish had previously said it lost 10,000 net subscribers in
the three months ended June 30, a vast improvement from the
135,000 subscribers who dropped the service a year earlier.
While some analysts have said Dish is in the midst of a
turnaround and is attracting customers from main rival DirecTV
, it reported weaker-than-expected financial results.
Second-quarter revenue fell 0.6 percent to $3.57 billion.
That compared with the $3.64 billion expected by analysts,
according to Thomson Reuters I/B/E/S.
The company's total costs and expenses rose 9 percent to
$3.1 billion, which Bernstein Research analyst Craig Moffett, in
a research note, called a "recipe for disaster."
"It's getting harder and harder to plausibly argue that this
is a turnaround, in our view," he said.
Adjusted for a charge related to a satellite license, the
company earned 59 cents per share. That missed Wall Street
estimates by nine cents.
Net income was partly weighed down by higher-than-expected
costs related to video retail chain Blockbuster, which Dish
acquired last year, Brean Murray's Mitchell said.
Subscriber acquisition advertising rose 75 percent
year-on-year in the second quarter to $118 million
Dish generated slightly more revenue per subscriber in the
second quarter at $78.11, an increase of 5 cents from a year
Shares in the company fell 9 cents or 0.3 percent to $30.58