Why Is Dish Losing Share In The Pay-TV Market?
Dish Network (NASDAQ:DISH) is losing its footing in the Pay TV market with a decline in the number of subscribers, as cord-cutting is getting prominent. While the entire Pay TV domain is suffering, the impact on Dish has been significant which is evident from the fact that the company has been unable to sustain its subscriber base despite the hefty positive contribution from Sling-TV.
Dish is the third largest Pay TV provider in the U.S. after Comcast and DirectTV, holding about 14% of the market. Historically, Pay TV services have done very well on the back of enhanced picture quality and the introduction of additional technologies such as HD programming and DVR services. However, with cord-cutting in favor of online streaming services becoming prominent, the age of stand-alone Pay TV seems to have run its course. Within this the lackluster market, Dish is expected to lose share going forward, which doesn’t bode well for the company given that the Pay TV segment contributes over 25% to the company’s value as per our estimates.
We estimate the company’s Pay TV market share to decline from 14% in 2015 to around 12% over the next six-seven years. Intensifying competition in a saturated market and the emergence of alternative platforms for consumption of content are the two main factors behind our projections. The U.S. pay-TV market is getting increasingly competitive and cable companies seem to be reviving themselves, with Comcast being the prime example. This is likely to make it difficult for Dish Network to gain market share. Comcast recently signed a deal with Netflix making the latter’s services available to its subscribers through the set top box, which gives the cable company a big competitive advantage over Dish. And it must be noted that in an intensely competitive operating environment, the easiest way to gain market share is by acquisition. However, the FCC is unlikely to view any significant acquisition favorably.
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The emergence of alternative platforms, such as online streaming, has also started eating into the pay-TV subscriber base. Netflix is already an established player in the online streaming market. Other content providers including Sony, HBO, CBS, and Dish itself have also launched their own services. Online streaming options offer a cheaper alternative as compared to traditional pay-TV packages which cost around $65-70 per month on average. The availability of these cheaper alternatives is inducing many pay-TV subscribers to cut the cord. Within this sluggish market, Comcast is less likely to lose its cable connections than Dish, thanks to its deal with Netflix.
While we believe that Dish will most certainly lose its share in the Pay TV market, the decline may not be too intense if its Sling TV service takes off. In its initial stages, the service has garnered a significant number of subscribers, but it would be a while before its strength could be gauged properly.
Have more questions about Dish Network? See the links below:
- What Is Dish Network’s Revenue & Earnings Breakdown Based On Expected 2016 Results?
- What’s Dish Network’s Fundamental Value Based On Expected 2016 Results?
- How Has Dish Network’s Revenue Composition Changed In The Last Five Years?
- Why Have Dish Network’s Revenues Increased ~20% While EBITDA Has Decreased ~20% In The Last Five Years?
- By What Percentage Can Dish Network’s Revenues Grow Over the Next Five Years?
- How Are Dish Network’s Revenue & EBITDA Composition Expected To Change By 2020?
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