There is proof television is dead. One of America’s largest television providers; DISH Network (NASDAQ: DISH), is getting out of the TV business.
Theoretically, 5G could be faster and deliver more content than current wireless networks. For instance, ATT’s 5G in Dallas offers 1.3 gigabytes per second (GBS) in data PC Magazine estimates. In addition, Verizon claims its 4G LTE wireless is 10 times faster than 3G.
The obvious reason for 5G is to make it easier for customers to download large files such as streaming videos, games, massive multi-player online games (MMOGs), blockchain DApps (Decentralized applications), cryptocurrenices, smart contracts, artificial intelligence (AI), and digital robots. My guess is, Ergen believes most people will want these amenities soon. In addition, Ergen thinks people will pay extra for them.
DISH could become the Fourth Largest US Wireless Provider
Consequently, DISH is paying $1.5 billion for Boost Mobile and some of T-Mobile and Sprint’s spectrum assets for $3.5 billion. Moreover, The Verge speculates the deal could make DISH America’s fourth largest wireless provider.
Deutsche Telekom’s T-Mobile and Sprint (NYSE: S) are merging to replaceVerizon (NYSE: VZ); or AT&T (NYSE: T),as America’s largest or second largest wireless provider. Verizon had 151.48 million wireless customers in the United States in 3rd Quarter 2018, Statista estimates. Meanwhile, AT&T had 143.83 million American subscribers in 3rd Quarter 2018.
To comply with US anti-trust laws; and get U.S. Department approval, Deutsche Telekom has to sell some of Sprint and T-Mobile’s wireless assets. DISH is buying those assets in what looks like a desperate gamble for survival.
DISH is dumping Television for Survival
In his Axios interview, Ergen admits DISH needs to exit television fast for survival. In Charlie admits, “we have money on hand today to acquire Boost and start building our network for a couple of years.”
Translation: “in two year’s time, DISH’s platform will not generate enough cash to pay for a new business to replace subscription television.” Thus, if Ergen wants a job in five years, he needs to find a new business.
Ergen wants out of subscription television, because he understands TV is dead. I think Charlie believes traditional television will soon no longer attract enough subscribers to be a profitable business.
Proof Television is dead
Frighteningly, there a great deal of data that justifies my suspicions out there. Statistics that prove television is dying include:
- My estimate of combined viewership for all five broadcast US TV networks in the 2018-2019 viewing season: 28.4 million. In detail, there are five American broadcast TV networks, Fox, ABC, NBC, CBS, and the CW. Nielsen Media research estimates, CBS’s viewership at 8.9 million, Fox’s viewership at 5.4 million, ABC’s audience at 5.6 million, NBC’s audience at 7.2 million, and the number of people watching CW at 1.3 million.
- 3.08 million – the number of viewers for the top-rated US cable TV program on Wednesday 24 July 2019. That program was the Fox News coverage of Robert Mueller’s congressional testimony, Deadline reports.
- 329.262 million, Worldometers’ estimate for the United States population in July 2019.
- 2.94 million, the number of people watching America’s highest-rated broadcast network; CBS (NYSE: CBS) on 25 July 2019, in Deadline’s estimate.
- 0.6% the percentage of American adults aged 18 to 49 who watched CBS on 25 July 2019 according to Deadline.
- 2.3% the percentage of American adults between 18 and 49 who watched broadcast television on 25 July 2019 in Deadline’s estimate.
Therefore, less than 1% of America’s population was watching the highest-rated cable television show on 24 July 2019. Moreover, if Deadline’s estimate is correct, less than 5% of Americans were watching broadcast television on 25 July 2019. To elaborate, 10% of 329.262 million is 16.431 million.
This situation is catastrophic for DISH because its’ business is selling cable and broadcast television it distributes by satellite. However my estimates show over nine out of 10 of Americans are no longer watching traditional television.
DISH Network’s Audience is dying off
Frighteningly, data from the United Kingdom shows television viewership could soon fall far lower. UK media regulator Ofcom estimates Britons between 16 and 24 watch just two minutes of TV news a day, The Guardian reports. In contrast, people over 65 watched 33 minutes of TV news a day.
That figure indicates DISH’s subscriber base is older and likely to die off. For instance, 4,671 Baby Boomers (Americans between 55 and 75) die each day, Incendar.com estimates. Therefore, around 1.705 million Baby Boomers die each year.
I think Ergen understands these numbers because of his remarks and DISH’s wireless plans. However, Ergen also understands there is still a way DISH can make money from video.
Television is dead but video lives
America is still a nation of couch potatoes but it is no longer watching traditional television. The data shows Americans prefer streaming video and games to traditional television.
Netflix (NASDAQ: NFLX) is now America’s largest “television network” with 60.01 paying subscribers in 2nd Quarter 2019, Statista estimates. Meanwhile, Hulu is America’s second largest television network with 26.8 million U.S. subscribers on 1 May 2019, Statista estimates. Importantly, Hulu’s U.S. subscriber base grew by 1.8 million from 25 million to 26.8 million between 4th Quarter 2018 and 2nd Quarter 2019.
An even greater threat to traditional television, could be Amazon Prime; which had an American subscriber base of 103 million in March 2019, Market Mad House estimates. In detail ,Statista estimates the number of American Prime subscribers grew from 95 million in 2018 to 103 million in March 2019.
Therefore, Amazon’s (NASDAQ: AMZN) potential market for Prime video was over 10 times the size of network television’s viewership on 25 July 2019. In addition, Netflix’s subscriber base is nearly six times the size of all five TV broadcast TV networks’ combined viewership.
Moreover, streaming video’s audience is growing while network and cable TV’s audience is dying off.
Is Fortnite more popular than Network or Broadcast TV?
Finally, there are video games which could be our most popular form of entertainment.
For instance, one massive online multi-player game (MMOG) Fortnite had 250 million registered users worldwide in March 2019, Statista estimates. In addition, the number of registered Fortnite players grew by 50 million from 200 million in November 2018, in four months.
Moreover, GitHyp estimates 158,674 people watched others play League of Legends and another 140,289 watched Fortnite play on Twitch 27 July 2019. For those over 40, and the childless, Twitch is an Amazon owned service that lets watch you others play video games.
Notably, I estimated the viewership for the top five games on Twitch on 27 July 2019 at 553,095. However, the viewership for the top 10 games on Twitch on that day was 786,182.
Therefore, viewership for the top 10 Twitch games exceeds the July 25, 2019 ratings for America’s fifth-rated broadcast network the CW. Deadline estimates the CW attracted 580,000 viewers on 25 July 2019. In addition, viewership for Twitch’s top five games approaches that of the CW.
How DISH Network plans to survive the Death of Television
Ergen plans to survive the death of television by getting into the 5G business. To explain, people will need a strong wireless signal to access Twitch, play Fortnite, shop at Amazon, listen to tunes on Spotify (NYSE: SPOT), and watch their shows on Hulu, Disney+, Amazon, and Netflix.
Ergen figures DISH could make money from 5G; but it will soon lose money on satellite video. Moreover, DISH can use its fleet of satellites to beam internet and video to 5G wireless transmitters. In particular, DISH could supply 5G to small towns and rural areas with no connection to fiber-optic cables.
DISH Network could make money by charging subscriptions to all the people outside the cities who want 5G. For instance, all the people who want to play Fortnite, binge watch shows on Netflix, Hulu, or Disney plus, watch YouTube videos, or watch game play on Twitch.
Interestingly, Facebook, JPMorgan Chase (NYSE: JPM), and Goldman Sachs (NYSE: GS) are all exploring the possibility of offering crytpocurrency; or stablecoin payment services. Those services will need a fast and reliable internet to run on, and DISH could provide it.
Is DISH Network Making Money?
Currently, DISH network is making some money from television. For instance, DISH reported a quarterly gross profit of $1.002 billion on 31 March 2019.
However, that gross profit was down from $1.0523 billion on 31 December 2018 and $1.088 billion on 31 March 2018. In addition, DISH reported an operating income of $456.3 million and a net income of $339.76 million on 31 March 2019.
Those numbers contrast with a quarterly net income of $337.08 million and a net income of $482.75 million on 31 December 2018. Comparatively there was an operating income of $529.51 million; and a net income of $367.56 million on 31 million on 31 March 2018.
Thus, DISH is making less money from television than it did last year. In fact, DISH’s quarterly revenues fell from $3.458 billion on 31 March 2018 to $3.307 billion on 31 December 2018 to $3.187 billion on 31 March 2019.
How Much Cash does DISH Have?
Importantly, Ergen’s statement about DISH having enough cash to finance its wireless adventure appears accurate.
For instance, DISH reported an operating cash flow of $732.93 million, a financing cash flow of $4.75 million, and a free cash flow of $612.07 million on 31 March 2019. Moreover, DISH had $2.393 billion in cash and short-term investments on the same day. In detail, DISH had $1.577 billion in cash and equivalents and $816.38 million in short-term investments.
Consequently, I think DISH has enough cash to finance the wireless acquisitions. However, I cannot tell if DISH has the money to finance the building of a 5G network.
DISH’s Potential Deep-Pocketed Partners for 5G
On the other hand, DISH could have a wealthy partner waiting in the wings. Cash-rich partners, DISH could turn to include: Alphabet (NASDAQ: GOOG), Facebook (NASDAQ: FB), Apple (NASDAQ: AAPL), and Amazon (NASDAQ: AMZN). Amazon, for instance, had $37.02 billion in cash and short-term investments on 31 March 2019.
Meanwhile, Alphabet (NASDAQ: GOOGL) had $121 billion in cash and short-term investments on 30 June 2019. Finally, Apple had $80.09 billion in cash and short-term investments on 31 March 2019.
Thus, there are several potential partners with big bank rolls for DISH’s 5G venture. However, I think Ergen could keep a Silicon Valley partner secret to avoid attention from the Trump administration.
Interestingly, President Donald J. Trump (R-New York) could make a regulatory crusade against Big Tech part of his 2020 reelection effort. Under those circumstances, Ergen could his Silicon Valley alliance secret until after the election.
Is DISH Network a Value Investment?
Given these possibilities I think DISH Network (NASDAQ: DISH) could be a value investment.
In particular, DISH is cheap’ Mr. Market priced its stock at $38.28 on 29 July 2019. However, DISH has not paid a dividend since 2012.
If you are looking for a cheap but risky telecom stock that makes some money but has serious growth potential DISH is an interesting choice. If Ergen’s 5G gamble succeeds, DISH could be a value investment for the 21st Century.
The data shows Americans want their games, social media, and streaming video. If DISH can provide those amenities faster with 5G, it could make money and survive the death of television.