This site requires a more recent version of Adobe Flash Player to function properly.
Go here to get Flash.
Trefis's graphical modelling tools require Flash, but here's a preview of some of the content you'll see once
Flash is enabled:
Investment Overview for Dish Network (NASDAQ:DISH)
${header:potential}
Below are key drivers of Dish Network's value that present opportunities for upside or downside to the current Trefis price estimate for Dish Network:
Satellite TV
-
Fee per Satellite TV Subscriber: We estimate this figure will increase from about $58.3 in 2011 to about $64 by the end of our forecast period. However, there could be an upside of a little under 10% to our price estimate if this fee were to rise to $70 instead. This could be possible if programming costs rise too much making it unfeasible for Dish to absorb them.
-
Dish Network Pay-TV Market Share: We estimate this figure to slightly decrease to 13.2% by the end of our forecast period compared to about 13.5% in 2011. However there could be about 5% upside to our price estimate if Dish Network can lift its market share to 14% by end of our forecast period. On the other hand if this figure were to decline to 12.5%, there could be downside of more than 5% to our price estimate.
-
Dish Network Gross Profit Margin: We estimate that Dish Network's gross margins will fall from a little over 48% in 2011 to about 44.5% by the end of our forecast period as programming expenses continue to increase. However, there could be an upside of about 10% to our price estimate if Dish can get back to 50% gross margin levels seen in 2008, by continuing to focus on quality subscriber base and increasing its prices.
For additional details, select a driver above or select a division from the interactive Trefis split for Dish Network at the top of the page.
${header:summary}
Dish Network is the third largest pay TV provider in the US after Comcast and DirecTV. The pay TV market includes cable providers such as Time Warner, Comcast and Cablevision, satellite providers such as DirecTV and Dish Network, and telecom providers such as AT&T and Verizon that offer fiber optic TV services. More than 90% of the 115 million TV households in the US subscribe to Pay TV services. Dish is the second largest satellite TV provider in the US after DirecTV.
Dish makes money by charging digital TV subscription fees to customers, selling digital TV boxes, selling premium services like HD and DVR, and by charging advertisers to advertise on some the channels it carries.
Dish Network acquired DBSD North America and TerreStar in 2011. The move comes as a strategic investment by Dish in which the company gets access to valuable spectrum that could potentially help it in building wireless data network in the future. The company is still seeking the required approval and may partner with a third-party to avoid building infrastructure of its own.
In addition to the above, Dish Network also acquired Blockbuster in 2011, and plans to continue to invest in reviving the brand and building a lucrative movie rental business.
${header:sourcesofvalue}
The majority of Dish's value comes from its core satellite TV service. Although the company offers customers additional services like HD and DVR service the value contribution of these services to Dish's overall value remains limited due to the lower fees charged for these services and the limited number of Dish customers that opt-in for these additions. Below is additional detail on the two primary reasons why Dish's core satellite TV service is the most valuable segment:
High Fee for Satellite Service
The Fee per Satellite TV Subscriber for Dish's core offering was about $58 per month in 2011. Although we forecast slight declines, we estimate that Dish will charge less than $8 per subscriber per month for DVR service and less than $10 per subscriber per month for HD service.
Limited Number of HD and DVR Customers
At the end of 2011, Dish had about 13.5% market share in the US Pay TV market, representing about 14 million subscribers. We expect Dish's market share to remain around current levels. The total number of subscribers to Dish's satellite service is the upper limit on the number of HD and DVR customers that the company can have. Currently, approximately 60% of Dish subscribers opt-in for DVR service and we expect this figure to rise to about 80% by the end of the Trefis forecast period. Similarly, HD service is used by less than 40% of Dish customers today and we expect this figure to rise to more than 65%.
${header:trends}
Bundling of services (TV, internet, phone) and increased competition from telcos (AT&T, Verizon) are the primary trends impacting Dish.
Competition rather than Cooperation with Telcos (e.g. AT&T and Verizon)
Before AT&T's U-verse and Verizon's FiOS fiber optic TV services were launched, telcos and satellite providers would team up to provide bundled TV, Internet and phone services to compete with triple play offerings from cable operators like Comcast and Time Warner Cable. However, telcos now compete with satellite providers in certain areas, and the level of competition will continue to increase as telcos continue to roll out their TV services.
Fiber-based providers represent one of the fastest-growing sector in Pay TV market
Several large telcos are upgrading old copper wire lines with fiber optic lines in their markets. The fiber optic lines provide high capacity bandwidth, enabling these companies to offer increased HD content and ability to bundle services.
Alternative platform threat
Dish Network in particular, and pay-TV service providers in general, face threat from emerging online video platforms like Netflix and Hulu. Although these platforms mostly provide content that is not running live on TV, they are now slowly penetrating into pay-TV provider's core turf. Netflix's successful bid for exclusive rights to the new TV show 'House of Cards' recently is an example.
Content owners demanding more money
Dish Network has engaged in conflicts with content owners in recent times over the issue of their demand for higher carriage fees. We believe Dish Network's price rise for 2011 was a response to cope with such demands so that channel interruptions do not occur.
Trefis Forecast Rationale for Fee per HD Subscription
${header:what}
This refers to the average monthly fee paid by Dish Network's HD subscribers to receive its services.
HD broadcast in the US started in early 1998 and gained popularity in recent times, especially for sports channels, owing to its better picture and sound quality over usual TV. Dish provides local HD channels in over 90 markets, representing 78% of US TV households and over 120 national HD channels.
${header:historicals}
Dish Network has been relatively expensive in its HD fee compared to its peers with HD subscription of $20 per subscription in 2006 and 2007. However, it introduced a new package in 2008 charging $10 per subscription for new customers. Nevertheless, old customers were allowed to transit to the new package by paying a downgrade fee.
In 2010 however, Dish Network allowed new customers to subscribe to free HD service and let older customers upgrade to free HD service for an upfront fee. Thus, average fee per HD subscriber saw some pressure in 2010 and 2011.
Going forward, we expect stable fee.
${header:rationale}
We considered the following factors for this forecast:
- Mixed impact of promotional offers and introducing additional HD channels
- Dish introduced a promotional offer of free HD for new customers in 2010. The company is likely to resort to such offers periodically in future to stay competitive.
- However, introduction of more HD channels and potentially, a tiered HD offering, could allow Dish to charge more to its subscribers.
- The mixed impact of above two possibilities is likely to keep average HD subscription fee stable.
Back to Company OverviewHow Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on:
DCF MethodologyView All Help Topics