Dish Network (DISH)
Q4 2011 Earnings Call
February 23, 2012 9:30 am ET
Executives
Jason Kiser - Treasurer
Joseph P. Clayton - Chief Executive Officer, President and Director
Robert E. Olson - Chief Financial Officer, Principal Accounting Officer and Executive Vice President
Charles W. Ergen - Co-Founder and Chairman
Analysts
Stefan Anninger - Crédit Suisse AG, Research Division
Marci Ryvicker - Wells Fargo Securities, LLC, Research Division
Douglas D. Mitchelson - Deutsche Bank AG, Research Division
Benjamin Swinburne - Morgan Stanley, Research Division
Michael Hodel - Morningstar Inc., Research Division
Tuna N. Amobi - S&P Equity Research
Craig Moffett - Sanford C. Bernstein & Co., LLC., Research Division
James M. Ratcliffe - Barclays Capital, Research Division
Bishop Cheen - Wells Fargo Securities, LLC, Research Division
Thomas W. Eagan - Collins Stewart LLC, Research Division
Todd T. Mitchell - Brean Murray, Carret & Co., LLC, Research Division
Presentation
Operator
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Good morning. My name is Nicole, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the DISH Network Corporation Q4 2011 Earnings Conference Call. [Operator Instructions] Thank you. Mr. Kiser, you may begin your conference.
Jason Kiser
All right. Thanks, Nicole. Well, thanks for joining us, everyone. My name is Jason Kiser, and I'm the Treasurer here at DISH Network. I'm joined today by Charlie Ergen, our Chairman; Joe Clayton, our CEO; Tom Cullen, Executive Vice President; Bernie Han, COO; Robert Olson, our CFO; Paul Orban, our Controller; and Stanton Dodge, our General Counsel. Before we open it up for Q&A, we do need to do our Safe Harbor disclosure. So for that, we'll turn it over to Stanton.
Jason Kiser
Thanks, Stan. And I believe both Joe and Robert has some prepared remarks they'd like to go through before we open up the lines for questions.
Joseph P. Clayton
Thanks, Jason, and good morning. When I last spoke to you all back in November, I discussed the steps that we had taken to refocus our business. I also told you all that we expected to see improved financial and sales performance in the fourth quarter. This momentum would springboard us into the new year. Then we'd launch our host of new strategic initiatives to enhance our ongoing transformation.
While I'm pleased to report that the fourth quarter was indeed a positive quarter for DISH, both commercially and financially. And today, I'm also going to briefly discuss our exciting new product and marketing programs that we announced last month at the Las Vegas Consumer Electronics Show.
But first, let me provide you all with an update on our DBSD and TerreStar spectrum assets. As you are aware, we've been working with the FCC to gain approval on our transfer and waiver rights request so that we can proceed in closing both transaction. We anticipate receiving a response from the FCC in the coming weeks. Until then, we cannot comment on our specific plans. But I will say that we're anxious to move beyond the regulatory phase. And we want to optimize these wireless assets in order to drive our compelling customer offering. This is the way the American consumer is going, wireless video, wireless voice and wireless broadband. A little later, Charlie can also speak to these assets when the question arises.
Now let's spend a minute updating you all on our Blockbuster segment. For the third straight quarter, the overall business was breakeven. For the third quarter, the overall business came in very close to what we had expected. And we have been very clear from the beginning that we would take action when necessary. As a result, the first quarter, we will close roughly 500 domestic stores for a variety of reasons, such as underperformance, footprint size or lack of landlord flexibility. The vast majority of these stores have flexible termination provisions. Now our goal is to reach a steady-state store count so that we can leverage with our current pay-TV business and our future wireless enterprise similar to the way that we've incorporated Blockbuster at homes by mail and streaming services into our pay-TV business.
Now let's take a look at the current pay-TV market environment. When the economy changes, the consumer changes, technology changes and the competition changes, guess what, you better change. There's no question that the significant shifts are taking place in the pay-TV industry today. The market is most certainly approaching a saturation point. We will still experience single-digit growth as the economy rebounds and new home formations restart. And within this mature environment, there will be some growth segments, like the Hispanic market and the consumer B2B or business market. These are 2 of the categories that will receive a much greater business focus from us as we move into 2012.
We've also spent the last 6 months retooling and reenergizing our core pay-TV business. This includes launching new products; new promotions; a new brand image, focused on variety, innovation and value; new corporate partnerships; new marketing communications, including a new website and new national advertising; and even new corporate mascots. Again, it is no secret that the pay-TV industry has been too focused on price. It is being driven today by aggressive new customer discounting at the risk of alienating existing customers. And our current products have had consumer-friendly names, like our own ViP 722k.
Going forward, we want our DISH products to be perceived more like the mobile phone industry, with names like the RAZR, the iPhone and the Droid. So we've introduced new corporate kangaroo mascots, Hopper and Joey, to symbolize a new era for DISH. They give a personality and an attitude to the product itself. The revolutionary new Hopper is the satellite industry's smallest, energy-efficient and feature-laden HD whole-home DVR. Hopper's sidekick is the Joey, a tiny, lightweight and easy-to-hide companion for multiple-room viewing. Our Hopper HD DVR solution lets the customer watch TV shows and movies in up to 4 different rooms at the same time, record as many as 6 HD programs at once and it is equipped with the fastest and simplest user interface in the video industry today. And to further differentiate our new product and technical platform from our competitors, we will bring more music, more movies and more magic to the American public.
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