(DISH) Dish Network Announces Video Streaming to Tap Netflix Customers

The low-priced leader in the U.S pay TV industry, Dish Network Corp. (DISH), in an attempt to capitalize on the recent price hike from the leading on-demand internet streaming media Netflix, Inc. (NFLX) plans to announce its new video streaming service rates on September 23, 2011.

Recently, DISH Network acquired Blockbuster Inc for $228 milion. The acquisition of Blockbuster enables DISH Network to offer several movie streaming services over the Internet, thus efficiently countering the competitive threats from cheap online movie distribution companies like Netflix and Hulu.

Netflix is one of the leading online video distribution company with a huge subscriber base of around 25.6 million across the U.S. The company recently changed its business model by charging $7.99 to subscribers opting for unlimited DVDs-by-mail and $7.99 for unlimited video streaming services. Increased rates were mainly attributable to higher content cost from TV distribution companies.

Earlier, both the services were offered by Netflix under a single plan of $9.99 per month. However, this sudden rate hike by the company provides the opportunity for Dish to tap those price sensitive customers. So we expect the price to be charged by Dish Network will be lower than the current price charged by its close rival Netflix.

In recent times, the demands for watching online movies are gaining huge popularity. The availability of tablets and smartphones will further entice people toward such video streaming services.

Companies like Netflix and Hulu, which are offering such online movie services at cheaper rates, tasted huge success in the recent past, thus allowing other big players like Amazon.com, inc. (AMZN), Wal-Mart Stores Inc. (WMT) to cash in on the opportunity. These companies has also started offering online movie rentals at cheaper rates, thus intensifying the competition further.

DISH Network is slowly transforming itself from a low-priced leader in the U.S. pay-TV industry to a premium service provider in order to reduce its subscribers’ churn rate.

Moreover, DISH Network’s continuous acquisition plans as well as the installation of two-way hybrid satellite-terrestrial broadband network, which will enable the company to offer transaction-based video-n-demand and high-speed Internet services, will act as positive catalysts for the stock going forward.

However, stiff competition from other cable and satellite TV operators coupled with continuous loss of subscribers and higher unemployment rate in U.S.,which resulted in lower disposable income for households, may act as headwinds for the company going forward.

We, thus, maintain our long-term Neutral recommendation for DISH Network. Currently, DISH Network has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

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