DISH Network Corp. (DISH) is opting for innovative advertisement campaign in order to gain maximum foothold in the intensely competitive U.S. pay-TV market. Recently the company has launched an ad-promo for its new “Free HD for Life" service. With this DISH Network will offer customers free High Definition (HD) service for life while almost all its competitors including its closest rival DIRECTV (DTV) charges an extra fee (around $10 per month) for HD service.
In recent past, we have seen that clever marketing promotions help DISH Network to beat DIRECTV for net new subscriber addition. During the first quarter of 2010, Dish Network added 237,000 new subscribers, significantly higher than 100,000 net subscriber additions by DIRECTV. ARPU was $71.18, up 1.6% year-over-year and churn rate was 1.4% compared to 1.83% in the prior-year quarter.
According to our assessment, in the pay-TV segment DISH Network is gaining from DIRECTV as well as from cable MSOs. The company is currently the third largest pay-TV service provider with little over 14.337 million subscribers, just behind Comcast Corp. (CMCSA) (23.477 million subscribers) and DIRECTV (18.66 million subscribers).
However, this fabulous performance was primarily driven by huge sales and marketing expenditures. As a result of this, in the first quarter 2010, operating income plunged 20.5% to $457 million, while operating margin slipped to 15%, from the year-ago level of 19.8%. Quarterly, Subscriber-related expenses increased 5.8% year-over-year to $1.64 billion. Subscriber acquisition costs rose by 41% to $412 million.
Nevertheless, we believe management’s decision for marketing promotions in order to increase subscriber base together with increasing investment in technologically advanced equipments will sustain the company’s future growth. The current Zacks Rank for DISH Network is #3 (Hold) which supports our Neutral recommendation.
Read the full analyst report on "DISH"
Read the full analyst report on "DTV"
Read the full analyst report on "CMCSA"
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