DISH Network Corp (DISH) 2016 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the DISH Network Corporation Q3 2016 earnings conference call.

(Operator Instructions)

As a reminder, this call is being recorded Wednesday, November 9, 2016. I would now like to turn the call over to Stanton Dodge. Please go ahead, sir.

Thanks, Jose. And thank you all for joining us. I am Stan Dodge, General Counsel at DISH Network. Jason is actually out today. I am joined by Charlie Ergen, our Chairman and CEO; Erik Carlson, our President and COO; Tom Cullen, EVP of Corporate Development; Roger Lynch, CEO of Sling TV; Bernie Han, EVP; Steve Swain, our CFO.

Before we open it up for Q&A we need do our Safe Harbor disclosures. We ask that media representatives not identify participants or their firms in your report. We also do not allow audio taping and ask that you respect that.

All statements we make during this call that are not statements of historical fact constitute forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by such forward-looking statements. For a list of those factors, please refer to the front of our 10-Q.

All cautionary statements that we make during this call should be understood as being applicable to any forward-looking statements that we make wherever they appear. You should carefully consider the risks described in our reports and should not place undue reliance on any forward-looking statements, which we assume no responsibility for updating.

As part of the process with the broadcast incentive auction, we filed an application to potentially participate as a bidder for those spectrum assets. Because of the FCC's anti-collusion rules, we are not able to discuss what, if any, spectrum resources we may intend to bid on, and we will not be answering any questions about the auction during today's call.

Operator, we will now open the call up, first, for analyst Q&A and then media Q&A.

Thank you.

(Operator Instructions)

And our first question comes from the line of Walter Piecyk from BTIG.

Thanks, Charlie. Can you comment if the Company is going to make any filings on the AT&T/Time Warner deal, or if you have any personal opinions on whether you think that's a deal that should get approved by the government or even reviewed by the SEC. And then I think Rich has a followup.

We haven't looked -- obviously, they haven't filed all their stuff. So, we'll obviously take a hard look at that. It's going to be a big deal. We're certainly going to have some concerns. But we don't file just to file against stuff. Obviously, you've got to go through whether there is harm to consumers or whether it violates anti-trust laws or whether it could be approved, could there be conditions. So, we will take a look at all of that stuff and respond appropriately when we have all the facts.

But, just as a side light, we already had concerns with AT&T and potentially with DirecTV Now where they're working a zero rate on their AT&T system. But they wouldn't necessarily let other providers, whether it be Sony Vue or Sling or Netflix, or whatever, be zero rated on their system. So, we think that's a violation of where net neutrality is today. So, we will look at that at the appropriate time.

Sorry. Don't you think zero rating is off the table now that we have a new President-elect?

That I don't know. But it's possible. It certainly is possible that with the election and with the leadership in Congress that all of net neutrality might get another look. That's certainly possible.

And then just, you're looking at two issues. One on Sling. Obviously, Sling needs access to end-point consumers, and net neutrality has been a key part of your strategy in getting access, along with Netflix. I'm just curious, to the extent that the Trump team has spoken very negatively about net neutrality, does that change the focus or how you think about Sling or how you go about Sling? And then just any update on the flex pack that you launched. Was that a material benefit to the quarter in terms of people opting for lower-priced smaller packages?

I'll take the first part. One of the things you always worry about as a CEO is that Washington does something you don't really have much control over, and Washington does make decisions and they pick winners and losers. So, I think you have to be pretty flexible of a company to deal with that.

Obviously, we think there's positive demand for services like Sling and Netflix. And I think that's going to have a place in the marketplace probably no matter what happens. But depending on what regulation or non regulation there is, might be dependent on maybe a scale of how big that's going to be.

A positive of that is we are hedged on the linear side of the business. The flex package, just to give customers more choice. As people get more choice with over-the-top services, it's imperative that linear TV also offer choices to people, and that it tries to get as many advantages as over the top has as it can.

Flex is more of a retention marketing tool than anything else, and that customers are increasingly saying -- we just can't afford to pay over a hundred bucks for video every month, particularly for channels we don't watch, and are there other things we can do? Rather than just give credits to somebody, which is what the norm in our industry is, just to hold on to hold onto a customer so you don't have to report churn, it's better to put them into a package that right-sizes them.

So, it's a strategy around that more than anything else. And I think that from that perspective it's a good strategic thing for customers and it helps us financially and it will help us on churn. You didn't see so much of it in the third quarter because probably the biggest factor was Tribune where you had a one-off event for almost the entire quarter.

Our next question comes from the line of Amy Young of Macquarie. Please proceed with your question.

One for Charlie and one for Roger. First, Roger, on Sling TV, can you talk about how big the market is to support services like Sling TV and DirecTV Now? What are your thoughts on the competitive landscape as you position Flex Pack, Blue and Orange? And, Charlie, as you think about cable perhaps entering into the wireless industry, how does that change your opinion at all on your spectrum? Thank you.

This is Roger, Amy. On Sling, when we launched the service we were focused on initially cord cutters and cord never beens. Cord something is a trend that we think has been going on for several years. In fact, 25 million households in the US who didn't have pay-TV. That was our initial market. As we added more content and more devices, then we started to broaden the target market to go after people who are currently leaving the traditional pay-TV ecosystem.

I think to answer your question, I would say it's a growing market, and it is a market that taps into some other growth segments, like use of over-the-air antennas, which is a growing market; broadband-only markets, which is a growing market; other streaming services like Netflix, which is a growing market. If I were to predict what would happen at a large scale over time, I would say that we should end up, if you count services like Sling and Sony and DirecTV's service they're going to launch, DirecTV Now, as part of the pay-TV ecosystem, I would expect it will end up with more pay-TV subscribers over time, but they will just be in different packages to give consumers more choice, which I think is really what they are looking for and one of the headwinds against traditional pay-TV today.

This is Charlie. In terms of cable and what they might do in wireless, this would only be speculation on my part, but I think obviously they've looked at it clearly. It looks like at least one company made a deposit in the auction. And I think the AT&T potential acquisition of Time Warner probably makes them look at it a little bit more, because ultimately you're probably going to need -- the world is looking at connectivity and wire and wireless is part of that. And to be successful, you are going to need a couple critical things.

Certainly you are going to need wireless spectrum to be in that business. You are certainly going to need scale and video. AT&T has both those things. And you need a network, and AT&T has that. And AT&T will have more scale and video potentially. So, that becomes a bit of a threat to some incumbents around the country, and it also becomes a threat to people who maybe don't have scale and video but have wireless spectrum and a network.

DISH is uniquely positioned in that we have wireless spectrum, and we have scale and video, but we don't have a network. So, you can imagine all the interesting things that might take place once this current auction is over. If somebody puts all the pieces together -- and AT&T is on the path to do that -- that makes it tougher. People on the sidelines have to do something different. In other words, you can't remain on the -- well, you can remain on the sidelines, but that might be malpractice.

Thank you.

Our next question comes from the line of Ben Swinburne, Morgan Stanley. Please proceed with your question.

Thank you. Good morning. I think Tom is on the call. If he is, I would love to get an update on chip set, handset developments in the ecosystem around wireless. I think you were expecting, or maybe we were expecting, some fourth-quarter chip set shipments around chips that included all the bands or most of the bands that your spectrum sits. Just any update on what's happened in the marketplace so we can think about 2017 and the technology path around spectrum.

Ben, this is Tom. It's our understanding -- well, we know that Qualcomm is shipping a band 66 chip set that has the 70-by-90 configuration. And I believe Intel is on the path to do that, as well. And it's our understanding that the recently released LGB-20 phone that I think was launched in the US about two weeks ago also supports the 70-by-90 band 66 configuration. That's the first step.

Its our expectation that more Android devices will start adopting that in 2017. Uncertain as to what the timing and road map would be for IOS. I would assume that it somewhat will dovetail with the wide-scale deployment of AWS3, whenever that occurs, those holders of AWS3 spectrum that purchased it last year.

This is Charlie. I think it's likely that our band 66 will be in handsets before we'd have a network, before there would be a network from us, but there will be other people who build AWS3 out over the next year or two. That's critical because it doesn't do you any good to have a network and no handsets that can receive it. You would like to have a year or two of handsets out there before something on your network got turned on.

Right. Makes sense. And then just going back to Sling, Roger, I am sure you have thought through DirecTV Now and how that may or may not be positioned in the marketplace. How do you think about Sling competitive with Now? And do you think you're attacking similar pats of the market? And any color on the quarter in terms of mix between the Orange, Blue, or the combo tier, which looked pretty compelling, even if it is a little less skinny.

Obviously, we are waiting to see what Now ends up launching with, but it sounds like it will be a pretty full bundle with 100 channels that I would expect would go after the traditional pay-TV ecosystem and probably something like Sony Vue, which is also a bigger bundle. It's a different strategy than we have pursued from the beginning. Our strategy was never to re-create that big bundle. It was to try to create a lot more consumer choice. That's what we do with something like Sling Orange, which starts at $20 and then you can just add channels that you want.

In terms of mix, we're seeing momentum, frankly, with all of our packages -- Sling Orange, Sling Blue, and people who take both. So, I think it's nice that we have been able to construct our packages in a way that gives consumers choice, and we are seeing them choose all of the above.

Thank you.

Our next question comes from the line of Bryan Kraft of Deutsche Bank. Please proceed with your question.

Hi. Good morning. I wanted to ask you a couple of questions. First, if you could update us on the designated entity case, where that stands and what you expect as far as timing on a ruling, as well as what might having after the ruling in terms of appeals, et cetera.

I just wanted to follow up on the last question, too. Just on DirecTV Now, specifically on the pricing, at $35 it's priced at about $5 below Sling Orange plus Blue, and I think about 2X the number of channels. Just whether you think you might have to do something different in terms of structuring the tiers or pricing.

And also on Sling, can you help us just to understand your cost position on the CDN side, what your total costs, you probably won't want to quantify it, but just to help us understand whether you may be at an advantage or disadvantage to others in the space on your streaming costs. Thank you.

Brian, this is Stanton. On your first question about the DEK, it's fully briefed and it's been argued in the DC circuit, and we would expect an opinion from them probably the first half of next year. A little difficult to predict. And as to any potential result, it's really just impossible to predict.

Okay. And either side could appeal the ruling if they are not happy with it?

Sure. You could seek a re-hearing en banc at the DC circuit or you could file a petition for cert at the Supreme Court.

Okay, thank you.

Bryan, just on your Sling questions, first of all, on DirecTV Now, we haven't seen the channel package that they're going with. 100 channels is a lot of channels, but are they channels that people care about, and are they channels that people are willing to pay more for? The thing about the Sling Orange package, it's $20. So $35 is a 75% higher price for it. There are a lot more channels, and if they are all channels that people value, then it will be good value and I am sure it will be a popular package.

But we haven't seen it yet so I can't really comment on that or whether it would cause us to rethink how we do our packaging. In general, we are very pleased with how we do our packaging because it really embraces consumer choice rather than just saying you got to buy all these channels.

In terms of CDN costs, in my career I have been buying bandwidth for 17 or 18 years, and every year the cost of bandwidth drops and drops and drops significantly. And that has been the case also with CDN costs. To the point where four or five years ago it would have been a material cost in the operation of a business like Sling, and today, it's not immaterial but it is not a cost that we worry about because those costs have continued to come down so significantly. And I think we get, because of the volume that we stream, because our customers watch a lot of television, I think we get quite good pricing on CDN.

Great. Thank you.

Our next question comes from the line of John Hodulik of UBS. Please proceed with your question.

Maybe just a broader question. How do you see the live OTT market evolving over time? How big as a percentage of traditional multichannel distribution or multichannel video product could it get? And is there enough room for not just Sling and DirecTV Now, but all the other guys that are lining up to enter -- Hulu, maybe YouTube, maybe Amazon? Just your view on how you see the competitive landscape over time would be great.

I think that OTT in general has the potential to be as big or bigger than the DBS business. It's the next way to watch live TV. Cable, then satellite, and now OTT Because it has some built-in advantages. It's immediate.

It's just an app, so you don't have to wait for an installer. You don't have two-year contracts. You can watch it on any device. The advertising can be more meaningful to you, can be more directed to you. So, there is a lot of different things you can do with it.

And you can have everything stored in the cloud so you don't really need a DVR because you can have network DVR, you can have start-over. It can be a much simpler user experience. So, there is a lot of built-in advantages in terms of where OTT can go. That's the positive.

The danger is that the ecosystem ends up so chopped up that it's truly an a la carte experience. The barriers to entry are not great, so pretty much anybody could enter the marketplace. There are a lot of technical things you've got to do, and there is some capital and so forth, but there is certainly big guys, big companies that could enter the business.

For example, not everybody maybe wants sports. I imagine Viacom would sell to anybody whether they had sports or not. So there is going to be packages with no sports. That means that people, it gets to where people like football, they may watch September, October, November, they may watch the football and then they may drop that service and go to somebody who doesn't have sports in February, March, April, May, June. Or they may like hockey and they watch that for four months out of the year.

And it's pretty easy to switch providers. You just push a button. It's not like you've got to wait for an installer and learn a new operating system and lose all your DVR functionality.

I've always been concerned that the content creators are going to end up in a place that's maybe not so good for them. But it should be good for consumers. The business will definitely grow.

So, that's the landscape. We don't know. We know there is seasonality to it. We know that the churn can be high one month and low one month. We know that people can come in for a big event and then drop out the next month.

We know that people like HBO, you can come in for Game of Thrones and then six weeks later drop out. Or you can bench two and drop out, and then you wait for the next year of Game of Thrones because that's the only thing on HBO you watch. It's an interesting business, and we will have to see how it all transacts and how people strategically do it. But it does have some risk that it's going to be disruptive to the marketplace for at least a period of time until people sort it out.

Having said that, Roger is now in his seventh year of doing this. There is a lot of things that we put in place for depending on which way it goes. We have maintained the flexibility that we need here. The technology is not so easy to duplicate overnight. So we think we are positioned in whatever direction it goes.

But we just don't know. As Roger said, there is some momentum in the business. I would expect that with DirecTV coming in, the momentum, at least for the segment, will grow, and we will see what happens.

Great. Thanks.

Our next question comes from the line of Marci Ryvicker at Wells Fargo. Please proceed with your question.

Thanks. I have two. First, Charlie, I am curious as to your thoughts on AT&T buying Time Warner in general because it is a change in strategy. There is not a lot of synergy, if at all. So what do you think it says about the wireless business in general? And presumably you're going to enter the wireless business, so does it make you more nervous?

And then the second question has to do with Sling. I think you said at one point that you are paying the same rate for the programmers for Sling as you do for the linear channels. Is that still the case, or are there some channels where you pay more and some where you pay less? Thanks.

I don't think we will get into how much we pay for channels. But, obviously, we look at our business holistically when we do transactions. We don't just pick one piece or another. We look at it. We have scale. We look at everything.

AT&T, I think AT&T has talked about some of their logic. There was obviously some logic to their acquisition of DirecTV. This is another step to get content and maybe control that a little bit more and be a bigger player there.

Time Warner is a good company. They are very profitable. If it's potentially accretive to what they are doing, it could make sense. In and by itself, on a financial basis, it could make sense regardless of whether there was any synergy or strategy to it.

You have to ask them as to why they're doing it. But they clearly still have a good wireless business. Everybody's going to have a different strategy. It's interesting. It's a different dynamic and it will put some pressure on some of the other incumbents.

Thank you.

Our next question comes from the line of Jonathan Chaplin of New Street Research. Please proceed with your question.

Thanks. I had two quick questions. One, now that Sling's becoming a really meaningful part of the business, I am wondering if you can give us some color on how many subscribers you have got on Sling at this point. And, if not, at what point you will start giving us a breakout of the old traditional business versus Sling.

And then my second question is, I think you are in an uncommon position to understand what the over-the-top business is doing to networks in general. I am wondering if you have got any data from your users on, when people adopt Sling, how much it increases their data traffic. How much of that is consumed over mobile versus on television sets? And what do you think that does for network congestion in general and for spectrum demand?

Steve, do you want to take that?

Yes, sure. As far as Sling subs and DBS subs, last year we explained our thought process on reporting DBS and Sling subs together, so we won't re-explain that logic again. We do, however, revisit that decision every quarter. We won't elaborate further, but that is something we come back to every quarter.

Roger, is the press estimate of 1 million subs plausible on Sling?

We are not going to really comment on that.

By the way, we are not trying to hide anything there. There will be a time to report it when it makes sense for us. You can look at -- what's that metric that comes out that shows the pecking order where people --?

Parks Associates.

Yes, Parks Associates -- Sling moved from number 10 to number 6, I think, over the last year behind --.

Of streaming services. The top five stayed the same and then Sling moved from 10 to 6. So, there is some momentum there.

Jonathan, as far as what it's doing to networks I assume you're talking about broadband networks?

Yes, exactly, broadband networks, both wired and wireless.

Similar to my earlier comment about the cost of bandwidths going down, the amount of bandwidth available on these networks has been growing very significantly. We know that mobile networks, the spectrum is more scarce than bandwidth that is available over wire line networks today. But, generally, the way we think about mobile is it's really important to our business because of the utility that people get by being able to watch all of their channels on Sling wherever they go. We don't have a distinction of are you in the home, are you out of the phone, is this in a set-top box or not. It's just all of your channels are available wherever you go.

That's important for us because it's a way that we activate customers, by advertising on mobile devices, and then getting people to download the app through a free trial, start streaming. But, ultimately, the majority of viewing happens on a TV set because the hours per session on a TV set are much longer than the hours per session or minutes per session on a mobile device. But that shouldn't be an indication that mobile is not important. It's quite important.

And in terms of what does it do to the networks themselves, what we see is the majority of viewing on mobile devices happens over Wi-Fi networks. We are starting to see shifts in that because you see competitors in the mobile space, like T-Mobile or Sprint, which are embracing unlimited data services, and we certainly have seen the amount of mobile streaming go up with services like that.

In T-Mobile, when they launched Things Are On, we saw viewing go up on that. I would expect over time us to see more and more mobile viewing as that market competes on unlimited data.

Got it. Thanks.

Our next question comes from the line of Mike McCormack of Jefferies. Please proceed with your question.

Maybe just a comment on what you are seeing out there as far as cord-cutting goes, anything you can size for us there. Also, perhaps a comment on any migrations you are seeing from linear over to Sling within your own business. And then, finally, if you don't mind, just on the linear side your view on pricing flexibility.

This is Charlie. I'd say general trends, we don't see a lot of cord-cutting from DISH to Sling, primarily because, the way Roger explained it to you earlier to an earlier question, it's a little bit different product. It's not really appealing to a guy who wants to watch a lot of stuff. It skews younger and people who are cord nevers or who have already cut the cord somewhere else. There is a few, but it's not a lot.

We do see a growing trend to cord-cutting. It ranges from people totally cutting the cord and just watching network TV with an offer antenna to maybe adding Hulu or Netflix or Amazon, or a combination of those, to people who had Sony Vue or Sling or maybe now DirecTV Now. There's a way for people to cut their bill and still get enough viewing to satisfy their need.

If you really need a channel, you can go to a bar or restaurant, your neighbor's house. My kids will come to my house if they really want to watch something. The customer has a lot of choice. It's very competitive. The customer has a lot of choice.

I think it's going to be a transition, just like there has been from a land line for phone to wireless. That transition is going to take place over the next 20 years. And how fast it goes and whether it accelerates is anybody's -- it hasn't really accelerated yet, like the hockey stick hasn't taken off yet. It's still a slow burn, so to speak. But we expect it might accelerate at some point in time, particularly as other people, as Hulu comes to market, AT&T comes to market, that might have some acceleration. If there is acceleration, then the whole world has to respond.

So, what we've done at DISH is we have a collection of assets that we think that are in position to respond to pretty much anything that happens. We have got scale and video. We have got technology in an OTT service that we've got a user interface and a technical interface.

And now I know how to do dynamic ad insertion and know how to do network DVR. We know how to do digital set-top boxes. We know how to do billing. We know how to do in-home installation, service and dispatch. And we have virgin nationwide sweet spot spectrum that can be used for connectivity and the Internet of Things and so forth.

I think for us, we don't know the answer to this but the strategy is, how do those assets get put to use for the maximum value for our shareholders. To some degree, I've said this many times, we are a mid-sized communications company, so, we don't exactly get to make all the decisions. Sometimes the decision is going to be made because somebody else is going to do something strategic that then opens up an opportunity for us to do something that we didn't know exists. Or somebody does something that changes the paradigm that forces companies to talk together that didn't talk together before, and that kind of stuff.

So I think we have a lot of assets, and obviously we got to put them to the best use we possibly can. Today that's DISH doing what we're doing. Obviously, that potentially can change. An AT&T/Time Warner merger might be a change element, might be a catalyst to change. So, we'll see.

And then just talking about pricing flexibility?

Pricing flexibility, I think on the linear side it's becoming more difficult. There is still room for us. We are still the lowest cost guys out there. We still skew a little bit more rural where it's a little bit less competitive. So, we still have a little bit of pricing power.

But I think that the pricing power probably, at best, would make up for the price increases you're seeing from the content providers. So, it's going to be a margin business that's going to fight some inertia. We are a little bit more fortunate than most, but there is going to become a limit to what the content providers can do on price increases.

There is starting to be a limit now we are seeing on -- we learned a lot with the Tribune takedown, and there is starting to be a limit on maybe retrans fees and things like that because customers start finding alternatives at some price. I don't know if we are there yet or not, but we are pretty close.

Great. Thanks, Charlie.

Our next question comes from the line of Ric Prentiss of Raymond James. Please proceed with your question.

Thanks for taking my question. A lot of discussion on high throughput satellites. How do you view the increasing capacity coming online here over the next couple of quarters to years, and how it's going to affect your business? Any concerns on the launch schedule changes?

And maybe a longer-term question, it seems to us that, given the change of pace in technology, possibly satellite should be looked at as maybe a shorter lifetime and cheaper costs. But just wondered your thoughts on the whole high throughput satellite industry and what's going on, and how it would affect you guys.

This is Charlie. That is probably a better question for a lot of the EchoStar folks, but I will speak to it as it relates to DISH. We're indirectly involved with high throughout satellites because of satellite broadband, which we sell. Obviously the launch of both Hughes and ViaSat, both have high throughput satellites.

They are going to be beamed on the United States which will open up a lot of capacity, which will do two things. One, it hopefully, will reduce churn in that category so we can give people more bandwidth. And it opens up more opportunity to sell more units where today many beams are closed on both of those providers today. In part, the vast majority of the country, we can't put in satellite broadband, even if we wanted to, because we don't have the capacity on the satellites to do it.

High throughput satellites make satellite broadband more economical. I think that's a positive for our business. I am sure it's a positive for their business. That's the way it directly affects us.

From a video perspective, we are the first guys to do spot beams, and that really helps with the local and some other things. It gives you some more bandwidth to do some different things in advertising potentially where you can start storing advertising on people's hard drives and then the advertising model gets better. There are some peripheral things that satellite technology are helping with.

But high-throughout satellites are going have probably a bigger impact for the ViaSats and the Hughes of the world as that technology expands around the world and as it starts connecting ships and planes and other mobility sites in a way that they were never connected before. In other words, you are going to be flying around the world and you're going to be connected and you're going to have full streaming of video just like you do in your home, and that's probably going to be a high-throughout put satellite product. Is there a follow-up?

Just wondering any thoughts on -- the satellites used to go up for 15, 20 years, but the pace of technology seems to be changing fast as you guys are trying to change your model, too.

It's a little bit off the subject for DISH, but I do believe that some of the companies are working on lower satellites, and thousands of satellites that have a life span of two, three years. That's going to have a place in the world of connectivity because there is low latency and you can change them out and the cost of launches goes down as soon as you can reuse rockets, which a couple of companies are doing now. That's a paradigm shift on that.

And then I think the industry is struggling with the fact that, do you build a 15-year satellite for hundreds of millions of dollars, or do you build satellites for a lot less expensive, they last three, four, five years. That was never an option before because the cost of the launch was so great. But as the cost of launches come down, if you can reuse rockets, I think you could make the leap that there is a paradigm shift to smaller, faster builds, more launches, more satellites in the future, whether it be LEOs, MEOs or GEOs.

Very helpful, thanks.

We will now take our final question from the analyst community.

(Operator Instructions)

Our final analyst question comes from the line of Kannan Venkateshwar, Barclays. Please proceed with your question.

Thank you. Just a couple from me. The first on your beef during the Tribune dispute as well as earlier disputes. You guys had a little bit of an experiment in a way distributing free antennas. Just wanted to understand what the experience with that was.

And you've also seen the number of antenna-only homes in the US grow over the last maybe year and a half or so at a faster pace. How do you guys think about that as an opportunity potentially from a cost perspective for the legacy business?

Our customers have offer antennas, they have for years. Some portion of our -- it has grown, not so much for our customers but it's grown more for the cord cutter who -- look, you can read the blogs and see it every day where somebody gets Netflix and an offer antenna and they are happy with that for their viewing needs.

It's not a big part of our business. We have done some of it. We certainly did it in the Tribune dispute. Many of those customers remained satisfied and didn't come back to Tribune channels. But some of those customers weren't satisfied and they did come back. So it's a household by household kind of thing.

I don't know that offer antennas are a replacement for the more traditional way of doing it that we in the satellite and cable business do it, unless retrans just got too high. There could be a breaking point where people go through the pain of getting an offer antenna, but we are not there yet. The vast majority won't do it yet.

And just a follow-up on programming costs, when we look at the subscriber-related expenses, obviously that benefits as the net adds go down, but, also, you guys had a few disputes and some of the channels went off. Going forward, when we look at that particular line item, is there any reason to expect that the trend line will continue to be low to mid single digits instead of what we have seen historically?

It depends when your programming contracts are up, but there remains pressure of higher prices in the linear television business. And that's going to change because you're going as you get into OTT and people have more choices and there ends up being more a la a carte offerings, people are going to, in my opinion, look to leave linear television because the price is too high and the bundle is too big. So, you say -- why am I going to spend $120 for this when I can get it from this vendor or that vendor, or I can switch seasonality between this vendor and that vendor, and maybe I will pay $60 a month during football season and maybe I'll pay $30 a month after football season, and I can switch between vendors.

It's going to put pressure on the other side of the linear television business. And my only message to the content people is there is things we could do about it to make that content better and the environment richer for our customers, but it involves things like changing the 16 minutes of commercials. It means we have to change things. So, we need to do bench viewing for customers with the lower advertising load. We need to have dynamic ads for customers that are more meaningful to the people.

We have to make it a better product for people so they are willing to pay more for it. We have to make a more convenient product for them so they will do it. Not all linear content companies move that fast. But if you have a long-term contract, you don't really want to change it because you know you're going to get that amount of revenue over a period of time. So, it takes a bit of a forward thinker on the content side to say -- let's change things now so that when we get to the end of the contract we are not in a situation where you take us down or we lose your service because we don't have a product that people watch any more.

Not to pick on anybody, but Viacom and Sony, it was just yesterday where I think Sony Vue announced that they were going to eliminate all the 22 Viacom channels. That means that a customer now can get -- that's a lower cost for Sony Vue, and if you don't watch the Viacom channels, you have a different choice. If you want Viacom channels, then maybe you're going to be able to go to DirecTV Now or Sling or somebody else. But if you don't want Viacom channels, you're going to have a choice now. You are not going to have to buy them. So, that's a change, and that's good for consumers, but it's going to put pressure on all the content providers.

Thank you.

We will now take questions from members of the media.

(Operator Instructions)

Our first media question comes from the line of Scott Moritz of Bloomberg. Please proceed with your question.

Great. Charlie, a question. I know we are only hours into this election results, but wanted to get your reaction. Over the years you've described in these acquired assets toward a vision of having a next-generation video service. Do you see a Trump administration helping to advance that strategy or hinder it? And if so, why?

It's a little bit hard because, obviously, the President-elect was not that specific on his policies, and we don't know who the cabinet members and the regulators would be. But let's take a general look at it. I think that the potential negative is just uncertainty, and that ultimately is going to go away. But that's going to be a negative for a while because we just don't know necessarily what the policies and the people who will be in charge of those policies. Once that gets in place, that will dissipate, to some degree.

But the positives are, I don't think there is any question that the President-elect and the fact that the Republicans and the Republican leadership in the Congress, that you are probably going to see bipartisan support for infrastructure. You are probably going to see a more rational tax code, particularly as it relates to corporate taxes, and particularly as it relates to maybe bringing overseas money back, which then can pay for infrastructure. So I think those are all potentially big positives for business in general.

I think you're going to see lighter regulation, which I think could help GDP. Any time you have less regulation, you have a better chance for GDP growth. I think you have a chance now for maybe immigration reform and maybe some bipartisan support for immigration reform. That would be a positive for GDP.

So, you got a lot of potential policy positives for business in general. And then those companies where you might have CapEx, whether it be satellites or networks or connectivity in rural America or connectivity in inner cities, or things like that, DISH is positioned in those areas should this Administration decide to go that route, which I think there is a high likelihood they will because this was an election about people. It's always the have and have nots, and the have nots voted for Donald Trump.

Rural America doesn't have as much connectivity. Inner city doesn't have as much. So, those things we would expect to probably see some real initiatives there. And certainly if you bring back billions of dollars from overseas, it's going to go into this economy here. So, we think there are some positives there.

Our next question comes from the line of Shalini Ramachandran of Wall Street Journal.

Hi, guys. Just following up a little bit on Scott's question, specifically on how the Trump administration would affect net neutrality and potential deals, I was curious for your thoughts given that Trump has said that he would kill AT&T/Time Warner. I don't think that those companies are taking that seriously at the moment, but I was curious for your thoughts specifically on those two points.

I think you've always got to take seriously when somebody is running for President what they say. But, obviously, I think any candidate would reserve the right to change their mind if they had different facts that do it. So, I think the regulatory process there is probably is probably as unknown as it was before the election.

I forgot the first part of your question -- oh, net neutrality. I think, in general, the Republican leadership, whether it be in the Congress or the executive branch, and potentially now in the Supreme Court, would have a lighter hand to regulation. So, you may see net neutrality be challenged or weakened going forward.

The American public also has come to make sure that -- the American public, the same people that voted in the election are going to say -- I want to be treated fairly and I don't want to be gouged. You're going to see a balance there, I think.

Got it. Thank you.

And our last question comes from the line of Malathi Nayak of Reuters. Please proceed with your question.

Hi. Thanks for taking my question. Just following up on Peter's question, do you think, Charlie, that media industry consolidation faces a high risk under the Trump administration? What could happen to a potential CBS/Viacom deal or the AT&T/Time Warner deal?

That's the uncertainty part that I talked about. We just don't know until you see who is going to be heading up the Justice Department and who is going to be heading up the FCC. In general, the Republicans would have a lighter regulatory, and, in general, I think there is going to be more flexibility in M&A transactions.

So, I think you will see more where it makes sense and where it doesn't harm the public interest and where it doesn't violate anti-trust laws. My gut feels that people today are looking at -- not today maybe, but once you have some certainty on the administration, people will then take a look at those policies and see what people say about it and maybe what their track records are and they will at that point determine whether they think M&A has gotten -- the regulation will be less or more or the same. My gut feels regulation will be less. I don't think that's any breaking news. But I think the regulation will be less.

Good. If I could ask Roger one question. In terms of your marketing initiatives with Sling TV, will we see a lot more investment on marketing the product now that there is going to be increased competition from, say, Hulu, and these upcoming services?

We have already been ramping up our marketing ever since we launched. It's not in response to competition or expected competition, but more in response to when we feel we are ready to expand either because we have additional content or we have additional devices or we're going after a new market that we weren't going after before.

You saw just in the last couple of months, we started with television advertising because we now feel like our product can appeal to a broader segment of the market than we could before we had all the devices that we're on and all the content we have. That ramp-up has already been happening and we're seeing good momentum from it.

Got it. Thank you.

Thanks, everybody. We will be on in February. Thanks.

Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your lines.