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DISH bottom line grows as video subs drop

Even though DISHNetwork Corp.'s pay TV subscriber numbers are shrinking, thecompany's profits are growing.

DISH said July 21 that on a net basis, it lost 281,000 videosubscribers during the second quarter. By comparison, in the second quarter of2015, the company reported a net loss of 81,000 pay TV subscribers.

Still, net income was up.

The company reported net income attributable to DISH of $410million, or 88 cents per share, up from $324 million, or 70 cents per share,during the same period in 2015.

The S&P Capital IQ consensus EPS estimate for the secondquarter was 74 cents on a normalized basis and 73 cents on a GAAP basis.

Two factors may be driving this performance. First, thecompany is being very thoughtful about spending to acquire and retaincustomers.

"We've just gone to a strategy that says it doesn'tmake sense for us to invest in a customer if we don't think we're going to geta return," DISH CEO Charlie Ergen said during an earnings conference call,adding that the company is factoring in information such as credit scores,geography and customer equipment.

Ergen noted this strategy reflects the new competitivereality of the pay TV market, both as a result of new over-the-top services andcable broadband service. "It's the new normal," he said.

The second factor, according to Ergen, is , DISH's OTT offering, whichdelivers live and on-demand programming. When it comes to new subscribers,Ergen said Sling "is kind of where the needle is going to move."

Notably, DISH does not break out its Sling TV numbers,meaning it is difficult to know how many subscribers the OTT offering has fromquarter to quarter.

But Sling TV CEO Roger Lynch did say during the call thatthe company has not seen many DISH customers migrating from satellite serviceto Sling. "Historically it's been a different customer base that weattract for Sling versus the satellite business," he said.

All in all, DISH revenue for the quarter totaled $3.84billion, up slightly from $3.83 billion in the year-ago period.

The company closed the second quarter with 13.6 million payTV subscribers, compared to 13.9 million at the end of second quarter 2015.

DISH also lost about 15,000 net broadband subscribers in thesecond quarter, bringing its broadband subscriber base to roughly 613,000.