Dish Network‘s Digital Video Recorder service will reach about 75% of subscribers by 2016, according to the Trefis company analysis for stock trading.
The higher the DVR penetration the better the financial performance and stock value of the company, says Trefis, which estimates that about 11% of the $27 Trefis price estimate for Dish stock can be attributed to its DVR business. This value is created by incremental cash flows as a result of monthly DVR fee that the company charges to its customers for DVR services.
Trefis estimates that about 50% of Dish Network’s satellite TV subscribers subscribed to its DVR service in 2009. This DVR penetration figure has increased by almost 12% since 2007 but still stands less than DirecTV’s 60% HD/DVR penetration in 2009.
Going forward we expect this figure to continue to grow rapidly and reach about 75% by end of our forecast period (2016). This rapid sustained growth can be attributed to the following factors.
1) The barriers to adoption of DVR services are low as Dish Network primarily bears upfront costs of installation
2) DVR adoption is an industry-wide trend driven by the convenience afforded to consumers by allowing them to watch their favorite TV shows at later time
3) We do not expect Dish Network to be under significant threat as a result of the legal battle against TiVo over DVR patent issues.