DISH Network Corp. (
- the second largest satellite TV operator in the U.S. may face a
hefty charge of $2.4 billion from
AMC Networks Inc. (
for unlawfully removing the latter's Voom HD channels from Dish
Network's program list.
It all began in 2005, when Dish Network entered into a 15-year
long agreement with AMC Networks, which was earlier a part of
Cablevision Systems Corp.
) to view its Voom HD channels to the formers subscriber group.
Cablevision assured to invest $100 million annually to upgrade
its programs for Voom HD channels. Nevertheless, spurred by the
company's failure to keep its commitment, Dish Network had to
terminate its contract eventually facing lawsuit from the former.
Cablevision denied the charge made by Dish Network by
providing proper evidence.
However, Dish Network brought a fresh charge against Cablevision
stating that the latter made an investment of $100 million related
to business (exclusive of program upgrades) thereby falling short
of its commitment.
Such hefty charge if implied on Dish Network will have a huge
impact on the company's cash flow. Last year, the company lost a
patent infringement case against
), which led to a $500-million of combined cash outflow for Dish
Network and Echostar (sister concern of Dish Network) thereby
deteriorating its cash position. Moreover, the company is already
engaged in many legal battles with many Media giants regarding its
new auto hop technology. Therefore, we believe that losing such
pending cases may further exert pressure on the company's cash
Few months back, Dish Network had even dropped AMC Networks'
popular channels from its program list due to the expiry of its
contract with the company. Moreover, AMC Networks' demand for
higher rates was also another important reason to drop its channels
from the list.
Accordingly, we believe that Dish Network's intention of not
renewing its contract with AMC Networks may further add spark to
their old court battle.
The current Zacks Consensus Estimate for Dish Network Corp. is
pegged at 55 cents for the third quarter with a growth rate
estimate of (22.63%). For 2012 and 2013, the Zacks Consensus
Estimates stand at $2.43 and $2.50 with a growth rate of (16.08%)
and 3.21%, respectively.
Currently, Dish Network has a Zacks #3 Rank, implying a
short-term Hold rating on the stock. However, considering the
fundamentals, we are also maintaining our long-term Neutral
recommendation on the company's shares.
AMC NETWORKS- A (AMCX): Free Stock Analysis
CABLEVISION SYS (CVC): Free Stock Analysis
DISH NETWORK CP (DISH): Free Stock Analysis
TIVO INC (TIVO): Free Stock Analysis Report
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