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The second largest satellite TV operator in the U.S., DISH Network Corp. (DISH - Analyst Report) created history by signing an online pay-TV deal with the leading media mogul Walt Disney Co. (DIS - Analyst Report).

The agreement will allow DISH Network’s customers to watch ESPN, ABC and Disney channels on PCs, smartphones and tablets through the Dish Anywhere app. Moreover, Walt Disney will also drop its earlier objection against DISH Network’s ad skipping Auto Hop device.

Earlier, in May 2012, four major TV network companies -- Walt Disney, CBS Corp. (CBS - Analyst Report), News Corp. (NWSA - Analyst Report)-owned Fox network and Comcast's (CMCSA - Analyst Report) NBC Universal -- filed a lawsuit against Dish Network’s Auto Hop device. The device allowed users to easily skip ads while watching recorded TV shows on multiple platforms. However, the shows can be viewed after a window time of 24 hours. The broadcast majors claimed that the Auto Hop device not only violates copyright laws but also significantly jeopardizes their advertisement revenues.

Hence, the new deal with Walt Disney will not only drop the technical objections against the satellite TV operator but will also set the platform for the future online TV agreements with other network companies. Moreover, DISH Network has also deferred its recorded TV viewing options by three days.

DISH Network exited fourth quarter of fiscal 2013 with 14.057 million pay-TV subscribers and 8,000 pay-TV subscribers. Moreover, average monthly pay-TV subscriber churn rate in the same quarter was 1.53% compared with 1.54% in the prior-year quarter while average revenue per user was $81.24 against $77.47 in the year-ago quarter.

Thus, we believe that the launch of such value-added services will not only drive ARPU growth but will also reduce subscriber churn while moving ahead.

Currently, DISH Network carries a Zacks Rank #3 (Hold).

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