DirecTV/Dish Merger Would Be Bad For Main Street
Questions about the possibility of a DirecTV merger with Dish Network keep coming up. Shareholders and executives of the two companies might embrace it, but hopefully for consumers, the marriage will never happen.
The FCC thwarted a proposed combination of the country’s two satellite TV operators a decade ago on grounds that it would harm consumers by reducing competition. Nowadays, executives at DirecTV and Dish would argue that the media landscape has changed so much since 2002 that those fears no longer apply.
“We think ultimately, that’s a combination that would be good for the consumer and should get done … Certainly, we would be interested in that opportunity if was achievable,” said DirecTV CFO Patrick Doyle last week.
Just how would it benefit Main Street? Arguments could be that prices would go down, innovation would go up and customer service would get better. None hold water.
In theory, with a combined 30 million-plus customers (maybe a third of pay-TV homes), DirecTV/Dish (D&D) would be able to stiff-arm networks and programmers into charging them less for content. The lower fees would then allow D&D to charge customers less.
No matter how much leverage D&D might have, content is king. Costs to offer ESPN, local stations and Fox News are only going to keep escalating and D&D will have to pay them.
Even if the combined entity were able to cut its costs, when was the last time a satellite or cable operator unilaterally announced a price decrease? Cost savings D&D might land would go right to its bottom line, not manifest themselves in reduced bills.
Customers today can wrangle some savings if they call a Comcast or Dish and threaten to switch operators. Which yields another reason why D&D should not be able to happen. With one less competitor, customers would have one less option to consider when deciding which satellite, cable or telco TV operator to go with.
Telco TV operators, Verizon and AT&T, have emerged since the proposed DirecTV/Dish merger was originally shot down. And their emergence is one argument the satellite operators make about their merging having a lesser impact on competition.
But many consumers don’t have access to a Verizon or AT&T option. There may also still be some rural customers who can only get pay-TV through DirecTV or Dish, why give them just one option?
Surely, the D&D colossus would bring more innovation if their R&D departments were combined. Their engineers could develop new technology more efficiently?
But this is such a crucial time in defining TV’s inevitable future of anytime, anywhere consumption, why risk curtailing innovation? Let the engineers try to compete with each other in their respective labs with pressure from two sets of executives rather than one.
And the more companies pressing for new products to try and steal each others' customers, the better. Networks despise Dish Network’s new Auto Hop that can eliminate all commercials easily in prime-time fare. But, from a customer standpoint, how cool is that?
Still, DirecTV CEO Mike White told Reuters recently his company has the technology, but has chosen not to make it available, saying “it’s not clear to me, there’s a raging demand from consumers for it.”
As for customer service, not much needs to be said here. It only gets better with competition.
While White, a former PepsiCo executive, may favor a merger, he made the best argument against one last year on Bloomberg TV as the topic of a Dish merger percolated.
“They have certain strengths,” he said. “I think we have certain strengths. And we both go toe to toe and competition makes us both better. I come from the soda industry, where we always said the Coca-Cola Co. made PepsiCo a better company because of competition and I think the same is true between us and Dish.”
Of course, the good news is D&D isn’t happening anytime soon, despite the continuing questions executives from DirecTV and Dish always get.
Executives agree that there is hardly a thirst in Washington for this type of merger, signified by the blocking of the AT&T and T-Mobile combination. Back in November before the decision was made, Dish Chairman Charlie Ergen reportedly handicapped the situation as such:
“If that merger is allowed to go forward, then I don’t think there’d be any problem with us merging with DirecTV,” he told analysts. “There’d probably be a lot of mergers that could happen that people never thought could happen. If that merger is not allowed to go through, then I think that a merger with DirecTV would be problematic.”
He looks to be right. DirecTV’s Doyle did say “we’ll see how the elections turn out, if that changes peoples’ views.”
Problem is, the people he’s referring to are inside the Beltway, not those who have to tighten their belts.