DISH to Target Young Crowd

The second largest satellite TV operator in the U.S., DISH Network Corp. ( DISH - Analyst Report ) ), intends to launch an electronic device that would facilitate smooth streaming of live TV shows to its subscribers.

Higher penetration of smartphones/tablets, coupled with increased rollouts of 3G/4GLTE technology, have completely changed the TV viewing options for customers. Viewers are now demanding multiple viewing options with anytime and anywhere TV service facility. In particular, the younger generations, who are extremely tech savvy, are hugely influenced by such changes. Subsequently, in a bid to target the younger group of customers – mainly belonging to high schools and colleges – Dish Network will offer them the streaming of handful of popular channels at lower price on their tablets/smartphones or PCs.

At present, the U.S. Pay-TV market is getting saturated on the back of stiff competition from other cable and telecom players. In addition, the launch of video streaming services from Netflix, Inc. ( NFLX - Analyst Report ) and Hulu at lower price has further intensified the competition. Moreover, sluggish economic growth coupled with continuous increase in cable prices have forced most of the subscribers to cut their cord and opt for cheaper online video services. In order to counter such competition, Dish Network is trying to explore new markets with its innovative over-the top product.

Dish Network is already offering online TV services outside the U.S. known as Dish World. Moreover, the acquisition of Blockbuster video chain, which has a huge collection of online movies, will further enhance its video streaming services.

However, there are certain issues, which Dish Network has to encounter. Firstly, availability of video streaming services at cheaper rates may expand its churn rate as more customers of Dish Network will subscribe the video streaming services at cheaper rates at the expense of costly Pay-TV services.

Secondly, it will be difficult for Dish Network to gain transmission rights of popular channels as the Media companies will always offer bundled channels (as per the existing business model), which in turn will drive up Dish Network’s programming expenses.

Therefore, taking into consideration these negative catalysts, we believe that negotiation with the Media companies will be an extremely difficult task for Dish Network, as these network giants may loose considerable amount of ad revenue from such deal.

Currently, Dish Network has a Zacks #3 Rank, implying a short-term Hold rating on the stock. Furthermore, considering the fundamentals we are also maintaining our long-term Neutral recommendation on the company’s shares.