DISH's Trial Venue Plea Rejected

Zacks

One of the leading satellite companies in the U.S., DISH Network Corporation’s (DISH) appeal to change the trial venue for the copyright-infringement lawsuits filed against it, by the TV network companies, has been dismissed by the Federal Court. The judge ruled in favor of the broadcasters and declared that the trial for the breach of contract claim will be held  in Los Angeles, California.

In May 2012, Dish Network integrated an advertisement-free program viewing option on its already popular Hopper DVR device. The new technology is called Auto Hop and it allows users to skip commercials at the time of watching recorded TV-shows.

This service is currently available for the HD subscribers of four prime time channels -- ABC, CBS, NBC and Fox. Furthermore, TV shows once recorded can be stored for eight days along with the advertisement-free viewing option.

However, the company was sued by three broadcasters including CBS Corporation (CBS), News Corp. (NWSA)-owned Fox network and Comcast Corp. (CMCSA)-owned NBC Universal who claim that the new feature not only violates copyright laws but also significantly jeopardizes their advertisement revenue.

Dish Network claimed that it did not breach any copyright law as the new service is similar to the DVR service that provides flexible viewing of TV shows to the customers at their own preferred time. The company argued that the network companies are acting as roadblock to its innovation and have filed a reverse petition against the network companies in New York.    

Dish’s appeal for a change in trial venue being rejected does not necessarily strike down its hopes of providing the ad-free TV services. Nevertheless, it would add to its list of pending legal issues which also include a breach-of-contract lawsuit filed against it by AMC Networks (AMCX) ,claiming a damage fee of an enormous $2.5 billion.

Such legal tussles are expected to continue until and unless the government intervenes and brings in more clarity to the contract terms between the media and broadcasting networks. 

The current Zacks Consensus Estimate for Dish Network Corp. is pegged at 70 cents for the second quarter with a growth rate estimate of (6.31%). For 2012 and 2013, the Zacks Consensus Estimates stand at $2.77 and $2.84 with a growth rate of (4.23%) and 2.55%, respectively.

Recommendation:

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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