Dish Settles Fee Dispute with Gannett

DISH Network Corp. ( DISH - Analyst Report ) – the second largest satellite TV operator in the U.S. – has reached a long-term fee agreement with the media firm Gannett Co. Inc. ( GCI - Analyst Report ) . A failed agreement between the two could have denied 2 million dish customers from getting access to Gannett-owned stations in 19 cities including Atlanta, Denver and Minneapolis among others.

The Mclean Virginia-based Gannett expected a 300% rate hike to carry the latter’s 22 channels, which are affiliated with NBC universal, FOX Networks, ABC and CBS Corporation ( CBS - Analyst Report ) .

The two also got engaged in a legal dispute regarding Dish’s Auto Hop technology, which allows the customers to watch recorded TV shows without commercial advertisements. Gannett has earlier argued that this has led to possible loss in advertisement revenue for them. Nevertheless, the new deal will allow the Dish customers to view Gannett-owned channels apart from using the commercial ad-skipping service simultaneously. The financial terms of the deal were not disclosed by either of the companies.

In a similar deal, AMC Networks Inc. ( AMCX - Snapshot Report ) had asked for a huge hike of 300% on its telecast fees from its current rate of 25 cents per channel, which forced Dish to dump AMC Network from its program list. For quite some time now Dish has been involved in a legal battle with AMC Networks for unlawfully removing the latter’s VOOM HD channels from the program list. If Dish looses the legal tussle it might face a hefty charge of $2.4 billion which might impact its cash position.

We believe this latest agreement will bring some respite for Dish as another failed agreement would mean loss of another major network partner from its stable. The new agreement would increase its affiliate fess and thus could impact its bottom line, if the company fails to pass on the rate hike to the customers. On the contrary, if the customers have to bear higher fees, it could lead to potential customer loss for Dish.

We are maintaining our long-term Neutral recommendation on Dish Network Corp. The company also retains a Zacks #3 Rank, implying a short-term Hold rating.