The low-priced leader in the U.S pay TV industry, Dish Network Corp. (DISH), in an attempt to capitalize on the growing popularity of online movie service facility is planning to offer online movie experience facility to the subscribers of its sister concern Blockbuster Inc.
DISH Network acquired Blockbuster Inc on May 2, 2011 for $228 milion. The acquisition of Blockbuster enables DISH Network to offer several movie streaming services over the Internet, thus efficiently countering the competitive threats from cheap online movie distribution companies like Netflix, Inc. (NFLX) and Hulu. Recently, DISH Network has also started biding for online movie business company Hulu.
Such a move on the company’s part comes at an opportune time when the leading on-demand internet streaming media company Netflix implements increased rate, effective from this month. We believe it will create further opportunities for Blockbuster to win back more subscribers for the company.
In synergy with the rate increase from Netflix, Blockbuster has also commenced an aggressive marketing campaign by offering a 30-day free trial offer to those price sensitive Netflix subscribers, thus creating future business opportunities.
DISH Network is slowly transforming itself from a low-priced leader in the U.S. pay-TV industry to a premium service provider in order to reduce its subscribers’ churn rate. Moreover, DISH Network’s continuous acquisition plans as well as the installation of two-way hybrid satellite-terrestrial broadband network, which will enable the company to offer transaction based video-n-demand and high-speed Internet services, will act as positive catalyst for the stock going forward.
However, stiff competition from other cable and satellite TV operators coupled with continuous loss of subscribers and higher unemployment rate in U.S.,which resulted in lower disposable income for households may act as headwinds for the company going forward.
We, thus, maintain our long-term Neutral recommendation for DISH Network. Currently, DISH Network has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
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