My last article, How to Profit From a Better World, extols the virtues of conscious capitalism. Conscious capitalism is a guiding belief for certain companies, like Whole Foods Market, Inc. (NASDAQ:WFM), in which these companies minimize their focus on profit maximization and instead focus on increasing value for multiple stakeholders, including employees and customers. The idea is that by maximizing value for all the company’s stakeholders profits will follow and everybody will be better off than before.
Meanest Company in America
24/7 Wall St. report asserts, “DISH’s management is regarded as so inconsiderate to employees, customers, and shareholders that Businessweek recently called it “The Meanest Company In America” and blamed long-time chief Charlie Ergen as the primary cause.” With this level of infamy you would expect that DISH Network Corp. (NASDAQ:DISH) would also be struggling to increase value to investors. So, how is it doing?
Surprisingly Well?!?!?
The answer right now is surprisingly well. The share price for DISH Network Corp. (NASDAQ:DISH) has increased over 120% during the last three years. The S&P over the same time period rose just over 50%. In effect, Dish Network has trounced the market.
What’s Next?
Despite the success of Dish Network’s Hopper DVR I don’t see the company keeping pace in the future. It’s high Price/Earnings (P/E) ratio of 41.7 compares unfavorably with its closest rivals DIRECTV (NASDAQ:DTV), Comcast Corporation (NASDAQ:CMCSA) and Time Warner Cable Inc (NYSE:TWC) which have P/E ratios of 13.42, 18.97, and 19.17 respectively. DISH Network Corp. (NASDAQ:DISH) finds itself in in a fierce battle for subscribers with these competitors, but its number of subscribers has plateaued at just over 14 million since 2012. 24/7 Wall St.’s assertion that “the number of customer complaints is large” at Dish Network is probably one of the leading causes for the plateau and also one of the causes for low employee satisfaction with the company. It seems as if major stakeholders such as employees and customers are not being valued by Dish Network and this shortsightedness will eventually catch up with the company if things are not changed.
In addition, DISH Network Corp. (NASDAQ:DISH) is having a difficult time diversifying its business to make up for the plateaued subscriber growth. Its bid to acquire broadband company Clearwire Corporation (NASDAQ:CLWR) recently lost out to a Sprint Nextel Corporation (NYSE:S) counterbid. In the process of the bidding war, Dish received pointed criticism from a Delaware Court of Chancery Chancellor for it’s “plan to end-run Sprint’s ability to completely control Clearwire through its majority ownership” while bidding for Clearwire. By rubbing government stakeholders raw Dish’s future attempts at buyouts of other broadband companies like Deutsche Telekom are likely to be bigger sources of friction than they otherwise might have been.
Outside the Box
The intense competition in cable/satellite TV field, and my own poor customer experiences with both satellite and cable providers makes me steer away from investing in the entire industry. However, there are a couple of fringe players that are an attractive alternative to DISH Network Corp. (NASDAQ:DISH) and their direct competitors.
Amazon.com, Inc. (NASDAQ:AMZN) is slowly moving into movie and television distribution through its Amazon Prime program. The beauty of Amazon and its Prime program is that it provides yet another perk for loyal customers of Amazon’s electronic retail and ebook business by bundling free two day shipping, the rental of over 350,000 Kindle titles, along with streaming of 41,000 movie and television titles for $79 a year.
While Amazon.com, Inc. (NASDAQ:AMZN) stock is at the top of its 52 week moving average at $312, it also sports a very optimistic P/E of -1314.83 and an insignificant $0.02 EPS for the most recent quarter. However yearly revenue continues to grow at an amazing pace with sales increasing by 27.1% last year and Amazon is on an impressive hiring binge to serve the increased demand that has caught even President Obama’s attention. In addition, customer satisfaction with Amazon is well above the retail average and 87% of employees approve of the leadership of Amazon CEO, Jeff Bezos, suggesting that Amazon’s growth, although rapid, may be sustainable due to the nurturing of their important stakeholders, which should also continue to benefit investors.
Netflix, Inc. (NASDAQ:NFLX) is a media company that found out the hard way that not taking care of customers often hits the bottom line. In an ill-conceived and premature rush to wean customers off of physical DVD disks in 2011 the company created the long-lasting Qwikster debacle that led to it losing 800,000 subscribers and saw its customer satisfaction score go from 86 to 74.
However, Netflix, Inc. (NASDAQ:NFLX) has seemingly learned from its mistakes and has worked on improving its position with customers by providing higher quality content, including the production of multiple original series, highlighted by the Emmy nominated series House of Cards and revival of the cult classic Arrested Development. Employee satisfaction is average at Netflix, with 69% of employees satisfied with the leadership of CEO, Reed Hastings. The improved position of the company has seen streaming subscriptions increase by 630,000 over the last quarter and revenue up 20% from a year ago. However, an astronomical P/E ratio of 308.56 and a stock price of $244.48, which is near the 52 week high, suggest this growth may already be fully integrated into the price of the stock.
Where to go?
Although I don’t suggest investing in any media stocks, I believe DISH Network Corp. (NASDAQ:DISH) is an extremely bad choice as an investor in this sector. Dish Network is a company that looks to increase short term profits at the expense of employees and customers and I believe that this will eventually catch up to them.
In contrast, Amazon.com, Inc. (NASDAQ:AMZN) has always valued multiple stakeholders, including employees and customers and looks to provide long term growth and value over quick profits. Netflix, Inc. (NASDAQ:NFLX), also, has refocused on catering to its customers and looks to sustain growth and increase value over quick profits. As a result, Amazon and Netflix are much better choices than Dish Network for those looking to invest in growth media companies that should also provide long term value to multiple stakeholders..
Joshua Caldon has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Netflix. The Motley Fool owns shares of Amazon.com and Netflix.
The article Dished Unconscious Capitalism originally appeared on Fool.com.
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