Aggressive Promotion Could Shake Up Dish Network, DirecTV Relationship

Includes: DISH, T
by: Trefis

Dish Network (NASDAQ:DISH) is the second-largest satellite pay TV provider in the U.S., trailing market leader DirecTV (NYSE:DTV). In a bid to attract new customers, Dish and DirecTV have both both been adding satellites and beefing up their High Definition (HD) channel counts.

Dish Network currently offers more HD channels, but DirecTV is catching up and may well be the first to introduce 3D on television. However, Dish Network recently launched an aggressive promotional that could help it challenge DirecTV going forward. Our analysis follows below.

Dish Network Currently Has More HD channels, But DirecTV Is Not Far Behind

With the recent addition of six new HD channels, Dish Network’s HD lineup now totals close to 200 channels. Dish Network offers 60 on-demand HD channels, 25 HD regional sports channels, 22 premium HD networks, 15 HD pay-per-view channels, and 70 different HD channels in their core programming packages.

In comparison, DirecTV currently offers fewer than 150 HD channels. However, the company recently launched satellites that will support more HD channels as well as 3D programming.

More HD Channels, Promotional Offers Give Dish a Temporary Edge over DirecTV

Dish Network recently offered to waive the $10 per month add-on fee for high-definition programming for customers who commit to a two-year contract. Offering more HD channels at no incremental cost is likely to draw customers to Dish Network. The likely result: increased HD penetration but reduced margins for the company. Below you can see how Dish Network’s stock depends on HD penetration.

It will be interesting to see how DirecTV reacts to Dish Network’s promotional offers. Traditionally, DirecTV has been less aggressive than Dish Network in terms of pricing. However, Dish could threaten DirecTV’s market leadership if it continues to promote its offerings aggressively.