Dish May Be Losing Ground In Pay-TV, But Is Handling It Well

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Dish Network (NASDAQ:DISH) is losing its Pay TV subscribers, mainly due to the prominent trend of cord-cutting. Digital video consumers are giving up their Pay TV subscriptions in favor of online video streaming services. Since it afffects tje industry broadly, this trend has impacted Dish as well as others. The company has been consistently loosing subscribers despite the positive contribution from Sling TV’s subscriber base growth.

While a decrease in subscriber growth essentially leads to a slowdown in revenue growth for the segment, we believe that Dish won’t have to shell out extra money to keep its revenues running. In fact, we project that over the next five years, the company will have to spend fewer dollars on operating activities, and subscriber acquisition and retention costs (SG&A) to generate a particular amount of Pay-TV revenues. For instance, Dish spent 24 cents on satellite broadcasting operating activities to generate a dollar in revenue in 2015, and we project this opex spent per dollar revenue to come down to 19 cents by 2020.

Dish pay tv operating efficiency

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Cost cutting initiatives, a notable contribution from Sling TV subscribers, and an increase in average fee per user together can ensure growth in revenues and a decrease in expenses. Competitive pressure and changing industry dynamics have pushed companies like Dish to undertake cost cutting initiatives. The focus has now shifted to stabilizing and improving the financial position, rather than shelling out more money to get new subscribers. On the pricing front, Dish has periodically introduced price hikes similar to other players in the market. Increases in programming costs have pushed Pay-TV players to boost their subscription costs intermittently. Since this has become an industry-wide phenomenon, raising Pay-TV and Sling TV prices in the future won’t be too hard for Dish. The aforementioned factors, coupled with Sling TV’s strong momentum, can help Dish gain operating leverage in the near future.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Dish Network
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