EchoStar Subscriber Growth 'Squeezed'


EchoStar Communications reported Friday that it gained 170,000 subscribers in the second quarter, down from a year ago, and that a federal patent office has rejected several patent-infringement claims that TiVo had made against the No. 2 satellite provider at a trial.

Back in April 2006, a Texas jury found that some of EchoStar’s digital video recorders had infringed on a patent held by TiVo. EchoStar, parent of Dish Network, has set aside $94 million to cover that judgment and interest. But an appeals court stayed that verdict in October, permitting EchoStar to continue to provide DVR service while it appeals the jury verdict.

In a 10-Q filed Thursday, EchoStar said that on July 30 the Patent and Trademark Office issued a “final office action” that “rejected as invalid all of the hardware claims that TiVo asserted against us at trial and which the jury found we had infringed.”

According to the 10-Q, the patent office didn’t reject the infringement claims related to software that TiVo had made at trial. TiVo can appeal the final action by the patent office, according to EchoStar.

The satellite provider gained 170,000 subscribers in the second quarter, down from 195,000 subscribers in the year-ago quarter. EchoStar now has 13.9 million subscribers.

In a report Friday, Sanford C. Bernstein analyst Craig Moffett described EchoStar as “squeezed.”

Moffett wrote, “With a collapsing housing market draining the organic growth from the pay TV market, subscriber growth in the second quarter was a zero-sum game. Cable held its own, losing roughly the same number of subscribers as last year. DirecTV took its expected share. And EchoStar got squeezed.”

He cited EchoStar’s “disappointingly high” churn rate of 1.68%.

“We believe that churn at EchoStar was at least partly influenced by its disproportionate exposure to lower-end subscribers, a group who have not fared well in this earnings season and who appear poised to bear the brunt of any real-economy spill-over of the current mortgage mess,” Moffett wrote.