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Continued strong consumer demand for the Sling TV over-the-top (OTT) service helped Dish Network overcome ongoing churn in its traditional pay-TV satellite business and impact from Hurricane Maria in Puerto Rico and the U.S. Virgin Islands in the third quarter (ended Sept. 30), according to company executives.

Dish ended the quarter with 13.203 million pay-TV subscribers including Sling TV, down from 13.643 million at the end of the third quarter last year, it said Nov. 9. The company activated about 638,000 gross new pay-TV subscribers in Q3 this time, down from about 736,000 a year ago. But, in the 50 U.S. states, net pay-TV subscribers grew about 16,000 in the third quarter this time.
Company executives didn’t break out Sling TV data from the total pay-TV numbers during an earnings call with analysts. Earlier in the week, the company said Sling TV became the first live and on-demand OTT service available on select Samsung smart TVs.

“There is a tremendous amount of competition in the OTT space.” CEO Charlie Ergen said on the call. “There is probably approaching a dozen companies” competing in it now, he said. But “not everybody’s selling exactly the same thing” and he predicted: “The market’s going to get more fragmented and, as a result, consumers will have some choices and, not only will they have choices, but they can move between packages with the click of a button on the Internet. So, I think that that’s going to be tricky for content providers because not everybody has to buy sports programming.”

There is also “better advertising opportunity” with OTT because of the possibility for interactive ads targeting specific users, he said. Churn, meanwhile, is “much more seasonal” with OTT than it has been with linear TV, he said, pointing to consumer interest in specific sports seasons as one reason.

On the traditional front, “linear TV has still got issues and still got problems, in part because of the way programmers continue to raise rates while they have declining ratings,” he told analysts. But he added: “The content’s still really, really good. To some degree, it’s fixable with rational people starting to make rational long-term decisions.” Dish has “been able to stabilize our core business a little bit better, even though it’s a shrinking industry,” he told analysts.

AT&T’s proposed purchase of Time Warner, meanwhile, might not be dead yet, despite published reports that the U.S. Department of Justice was demanding major asset sales to approve the merger, Ergen also said on the call.

Dish pay-TV subscriber churn rate was 1.57% in Q3, down from 2.11% a year ago, Dish said. Pay-TV average revenue per user was $87.23, down from $89.44 last year.

Dish reported Q3 revenue dipped to $3.58 billion from $3.77 billion last year, with subscriber-related revenue coming in at $3.55 billion, down from $3.73 billion. Profit attributable to Dish was $297 million (57 cents a share), down from $318 million (67 cents a share) last year.

Hurricane Maria “caused extraordinary damage” in Puerto Rico and the U.S. Virgin Islands in September, resulting in a widespread loss of power and infrastructure there, Dish said in its earnings announcement. Due to the devastation and loss of power, “substantially all customers in those areas were unable to receive” Dish service as of Sept. 30, it noted.

To ensure customers wouldn’t be charged for services they couldn’t receive, Dish proactively paused service for those customers, it said. The company removed about 145,000 subscribers, representing all its subscribers in Puerto Rico and the U.S. Virgin Islands, from its pay-TV subscriber count as of Sept. 30, it said.

When accounting for the one-time removal of 145,000 subscribers and for 16,000 net pay-TV subscriber additions in the 50 states, pay-TV subscribers declined about 129,000 in the third quarter, Dish said, adding it expects to incur certain expenses in connection with the re-activation of returning customers in those areas.