Dish Network’s Subscriber Numbers Boosted By Sling TV, But Will ARPU See Pressure?

Dish Network‘s (NASDAQ:DISH) stock has declined marginally in the week following its Q4 and full-year earnings release. ((DISH Network Reports Year-End 2016 Financial Results, February 22, 2016, Dish Network Press Release)) Dish added 28,000 pay-TV subscribers in the quarter – though some of that may have been due to a change in the calculation for commercial accounts – following several quarters of declines. However, the company’s subscriber base shrunk overall during full year 2016. Meanwhile, growth in ARPU resulted in moderate pay-TV revenue growth for the year 2016. The company also participated as a bidder in the FCC’s incentive auction during the year, though management was not able to elaborate on its bidding status on the earnings call. Management also stated that the company’s options are still open in terms of how it will use its current spectrum holdings.

See our complete analysis for Dish Network

Sling TV Subscribers Aid Growth

Dish’s Pay-TV business witnessed marginal growth during 2016, mostly on the back of higher ARPU. The Pay-TV and broadband revenues grew to $15.09 billion for 2016 compared to $15.07 billion in 2015. ^[1] The company lost 226,000 video customers in 2016, though its average revenue per user (ARPU) grew by 2.15% to $88.66. ^[2] The company could have lost even more subscribers were it not for Sling TV; while the company does not disclose standalone numbers for Sling TV currently, we believe that the net Sling TV subscriber adds have helped reduce the rate of decline in the pay-TV subscriber base. Dish’s management believes that Sling TV is well poised to take advantage of changing video consumption behavior and change in preference towards streaming. While this will likely put pressure on the company’s ARPU given Sling TV’s lower price point, it should still help Dish shore up its pay-TV revenues overall, as it will help the company mitigate the risk of cord-cutting. However, competition in the video streaming market is intense, with the presence of major players such as Netflix (NASDAQ:NFLX), Amazon and Hulu. Therefore, we expect that Dish will continue to lose pay-TV subscribers throughout our forecast period, albeit at a slower pace.

We currently have a $62 price estimate for Dish Network, which is about in line with the current market price.

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1. Dish Network’s 10-k SEC Filings [↩]
2. Dish Network’s Earnings Release [↩]