Mounting programming costs have forced the second largest satellite TV provider, Dish Network Corp. (DISH), to remove AMC Networks Inc’.s (AMCX) channels from its program list. The company stated that the AMC Networks’ channels will be unavailable following the expiry of its contract on June 30, 2012.
New York-based AMC Networks, primarily known for its popular TV shows like "Breaking Bad," "The Walking Dead" and "Mad Men," will not be available further as Dish has no plans of renewing its contract with the cable channel operator. Dish also plans to replace AMC Networks’ low rated channels like IFC, WE and AMC with HDNet Movies, HDNet and Style.
AMC Networks had asked for a huge hike of 300% on its telecast fees from its current rate of 25 cents per channel, and this was also a reason for the non-renewal of the contract. Moreover, most of the popular shows of AMC Networks can be easily accessed through iTunes, Netflix, Inc. (NFLX) and Amazon.com Inc. (AMZN), hence reducing the popularity of these shows to Dish’s customers.
In recent times, most cable and satellite TV service providers like Time Warner Cable (TWC) and Comcast Corp. (CMCSA) have been continuously increasing their fees in order to mitigate their rising programming expenses. However, Dish remains the only company to avoid any increase in fees, thereby making its service offerings more competitive than its peers.
Apart from increasing their broadband service prices, the cable companies are also diversifying their business to further mitigate the content expenses. However, Dish lacks the capacity to offset its programming expenses due to the unavailability of other business platform under its portfolio. So it is to be seen how long Dish can survive the mounting pressure of increasing content cost without passing it onto its subscribers.
Currently, Dish Network has a Zacks #3 Rank, implying a short-term Hold rating on the stock. We are also maintaining our long-term Neutral recommendation on the company’s shares.
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