Dish Network (NASDAQ:DISH) is set to launch its streaming movie service next month through Blockbuster that it acquired in Q2 2011. While the movie streaming space is dominated by Netflix (NASDAQ:NFLX) and is getting crowded with other video on demand (VOD) providers like Hulu, Comcast (NASDAQ:CMCSA) and DirecTV (NASDAQ:DTV), a comparable streaming service offering at a competitive price will help Dish subside its subscriber losses and improve its overall revenues.

Dish also sells digital TV receiver equipment, some with HD and DVR features, to its customers and third-party retailers. To acquire more customers, Dish sells receiver equipment at subsidized rates and also offers free installation leading to increasing costs. Blockbuster & receiver equipment sales together account for 10% of our Dish’s stock price estimate.

While we estimate Blockbuster & equipment sales revenues will increase from $900 million in 2012 to $1.20 billion by the end of our forecast period, Trefis members expect an increase to $1.30 billion during the same period. The member estimates imply a small upside to our price estimate for Dish stock.

We currently have a Trefis price estimate of $29.30 for Dish Network’s stock, about 20% above the current market price.

Dish Bearing Receiver Equipment Costs

Dish Network bears the upfront costs of installation of broadcast equipment such as satellite dish and receiver systems as customers are cost conscious and will avoid upfront costs, and is also a way for Dish to attract customers to try out their service. The domestic customer base buying unsubsidized equipment is low, and we do not expect to see rapid growth either. Additionally, the ongoing trend of viewing content online is catching up thereby reducing the demand for satellite receiver equipment. Dish is certainly aware of this and is trying to promote its movie streaming service through its acquisition of Blockbuster. In May 2011, Dish introduced three months of free access to Blockbuster’s DVD-by-mail service for new customers who subscribe to its satellite TV service.^[1]

Stakes High on Blockbuster

Although Blockbuster went bankrupt, the brand is still very much alive. Dish sees ownership of Blockbuster as a competitive advantage and is likely to promote the service aggressively.

In competition with Netflix, Blockbuster will be launching its streaming-movie service next month.^[2] While Dish provides its own streaming service through Dishonline.com for its paying customers, launching a standalone movie streaming service will be ambitious given that Dish is traditionally a satellite broadcast provider and Netflix is way ahead in the game in terms of technical expertise and know-how of the Internet business.

If this service however meets consumer expectations, it can reduce subscriber defections and losses for Dish that were a highlight in the company’s last quarter results. (See Dish Plans to Take on Netflix with Blockbuster Streaming Offering)

Our complete analysis for Dish Network’s stock is here.

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