DISH Prevents Channel Blackout

In order to avoid disruption of services, DISH Network Corp. (DISH) – the second largest satellite TV operator in the U.S. – has extended its television broadcast deal with TV network major Walt Disney Co. (DIS). The deal extension is for a short period and both the parties are trying to reach a long-term agreement. However, the terms of the deal were not disclosed.

DISH Network’s deal extension decision has stemmed from the recent rift between pay-TV operator Time Warner Cable Inc. (TWC) and TV network giant, CBS Corp. (CBS). Demand for higher service renewal fees by CBS had caused Time Warner Cable to drop the former’s channels from its list.

However, the cable company eventually renewed the service at a higher rate. Start of the NFL season on Sep 8 had induced Time Warner Cable to restore the channels, apprehending subscriber loss.

In the second quarter of 2013, DISH Network lost around 78,000 net subscribers compared with 10,000 in the year-ago quarter. Hence, we believe that reaching a short-term agreement with the Disney channels will avoid complete channel blackouts, thereby minimizing the chance of further subscriber loss.

In the same time frame, DISH Network reported dismal financial results with Subscriber-related expenses up 5.5% year over year to $1,924 million, driven by higher programming content costs.

Expensive sports content drives programming content costs largely since people always prefer watching live sporting events. As per research firm SNL Kagan, Disney’s most popular sports channel, ESPN charges as high as $5.54 a month per subscriber from every pay-TV operator.

So unavailability of the ESPN channel on its list for a short period may further aggravate subscriber loss for DISH Network.

Currently, DISH Network carries a Zacks Rank #5 (Strong Sell).

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