It was a half year ago that Dish Network struck a deal to buy bankrupt Blockbuster for $320 million. Now we’re seeing how the combination is supposed to make money.
As rumored earlier in the month Dish announced the launch of Blockbuster Movie Pass – calling it “the first subscription movie service bundle in pay TV history.” Beginning October 1st the $10 per month service will offer more than 100,000 DVD movies, TV shows and games available by mail, more than 3,000 movies w3hich can be streamed to TV and more than 4,000 which can be streamed to a PC, plus hundreds of on-demand TV shows.
At Wells Fargo Securities, analyst Marci Ryvicker is calling the move “understated yet brilliant” – and characteristic of Dish founder Charlie Ergen.
“Here’s why: (1) ARPU [average revenue per user] should increase with very little incremental programming cost. (2) Churn should improve given that DISH now offers the most comprehensive entertainment package available. (3) Gross adds should increase as ONLY DISH SUBS can access the service. (4) Timing could not be better with Netflix’s recent ‘fall from grace.’ At the end of the day, we think Blockbuster Movie Pass could add an incremental 2%-23% to 2012 OCF [operating cash flow] estimates. The best part is that this is ALL FUNDAMENTAL AND HAS NOTHING TO DO WITH THE SPECTRUM, which we think adds even further upside potential to valuation. We reiterate our Outperform rating and $36-38 range,” Ryvicker said in analyzing the new offering.
RBR-TVBR observation: This kind of makes the folks at Netflix look stupid for eliminating package pricing for streaming and DVD rental by mail combined – forcing customers to choose one or the other or really shell out for both. Will the Dish-Blockbuster combo package force Netflix to backtrack?
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