Dish Network's Pain Is Your Gain

Even in the deepest recession in eight decades, there's one non-necessity Americans refuse to give up: television.

We're addicted to entertainment, whether it's the NBA playoffs or "American Idol." And if getting more channels means paying more money, most of us are willing to fork over the cash. Although cable-TV bills increased 7.5% in the second half of 2008, according to research firm Centris, 81% of respondents in a recent survey said they were "not at all likely" to cancel their service.

That's good news for the pay-TV business, right? The bad news is that it's a brutally competitive field. While cable operators such as Comcast(CMCSA Quote) and AT&T(T Quote) have been adding customers, Dish Network(DISH Quote) has been losing them.

When Dish reported its first-quarter earnings this week, the company's stock actually went up, since its performance was better than expected. Revenue rose 2% from the same period last year, thanks to company-wide cost-cutting and consumer-price increases.

But the customer numbers weren't encouraging. Although Dish added 653,000 new subscribers in the quarter, a greater number canceled their service, leading to a net loss of 94,000.

In its Securities and Exchange Commission filing, the company was upfront about its struggles. "While economic factors have impacted the entire pay-TV industry, our relative performance has been mostly driven by issues specific to Dish Network," the report acknowledged. While Dish's competitive advantage was once its relatively low pricing, competitors have been offering promotions.

As a comparatively small player in the cable and satellite TV world, Dish in many ways faces the same challenges as any small business, so it's worth looking at where the company has stumbled.