I have the same problem... I think the subscription-manager package available for CentOS 7 is not totally compatible with Red Hat Satellite server. It is not the same but you can manually do this task by selecting All Hosts > click on the CentOS host you want to work on, then do edit > manage host > Operating System > Select the OS from the drop-down menu > Submit. Revert the manage host selection by clicking on Edit > select Unmanage host > submit; the OS property will persist. This is not a solution but it is a work-around.