What Is Dish's Magic DVR Number?
At the moment, no one but Dish knows that answer, so we could be talking about anything from a harmless pitching wedge-induced divot to a devastating crater caused by a wayward asteroid.
Dish refuses to provide an exact tally, but says it has upgraded "many" customers that were using the older MPEG-2 DVRs. But that hasn't stopped industry analysts from speculating on that figure and how much harm it could do to Dish's pocketbook.
In his report, Collins Stewart plc Analyst Tom Eagan estimates there are 3 million infringing DVRs in the field, putting costs in the neighborhood of $750 million if Dish has to replace them at about $250 per unit. If Dish avoids that and tries to settle with TiVo on a license fee, Eagen sees the costs coming in at $117 million per year at $3.25 per box.
Sanford C. Bernstein & Co. Inc. Analyst Craig Moffett, in a note issued Thursday, notes that 2008 court records suggest the number could be as high as 4 million, but acknowledges that Dish has been removing those devices from the field to help reduce its exposure to the TiVo risk.
But how much lower? It could be a lot. Moffett, citing a story in Satellite Business News, says the disablement provision could be just 500,000 to 1 million boxes.
"If the number is indeed that low, then Dish Network's negotiating position is significantly less dire than our previous estimates," he writes. Moffett had earlier theorized that disablement could be tantamount to a "death sentence" for Dish if the company was faced with shutting down and replacing as many as 8 million boxes. Under his latest model, the costs of upgrading more than 3 million DVR customers, at $350 per box, would still reach more than $1 billion. [Ed. note: That's about what Dish is paying for distressed satellite company DBSD North America Inc.]
"But disablement of 500K or fewer [DVRs] starts to sound almost feasible," he adds.
Elsewhere, Citadel Investment Group LLC Analyst Vijay Jayant estimates that Dish has deployed an average of 6 million infringing boxes over the contempt period (April 2008 through July 2009), but adds that Dish stopped selling those models a while ago and believes "that number is materially lower now, in our opinion."
With those estimates and opinions put together, it's looking less and less like the en banc ruling will result in a death blow to Dish. And Dish's stock has been relatively stable this week (it was up 3.35 percent in early trading Friday), so investors haven't exactly been spooked by the decision.
Timing is everything
The other big, outstanding question is how long Dish will have to adhere to the order, which won't take effect until next week. The judge "could give Dish thirty days, or sixty days ... or one," Moffett notes. Dish, by the way, is already seeking a stay of the disablement provision while it appeals to the Supreme Court, and the judge hasn't handed down his decision on that one yet.
And even then, this ordeal still may not be close to being over. The case, already eight years old, stands to reach the decade mark, Moffett adds, because the judge will also have to reconsider whether Dish's initial software workaround is still infringing on the TiVo patent.
— Jeff Baumgartner, Site Editor, Light Reading Cable