Commentary

DirecTV-Dish Network Merger Sounds Doable, Maybe Even Inevitable

Almost 20 years ago, the thought of a merger between two of the most powerful satellite TV-delivered services of live, linear TV networks was something few could stomach -- given anti-trust concerns.

It was a slam dunk then for federal regulators to put the kibosh on a potential merger of Dish Network and DirecTV. One key reason: Those companies had a monopoly in rural areas, where cable wasn’t available.

Now, satellite services face more competition from a host of new internet-delivered services. But as a result, DirecTV and Dish have been struggling to keep up -- keeping or adding new subscribers to either of their respective satellite or internet-delivered platforms.

Now those satellite companies don’t look as strong.

For example, DirecTV is projected to lose a massive 1 million subscribers in the third quarter. For 2018, Dish Network had a net loss of about 920,000 subscribers.

Craig Moffett of MoffettNathanson wonders about the financial health of both DirecTV and Dish.

He says that seventeen years ago, “Satellite TV was growing by leaps and bounds. Now it is in free fall. That alone may be enough to settle the debate. Sure, two would be better than one, but both are credible bankruptcy risks on their own.”

Executives at AT&T, the owner of DirectTV, say that despite some key financial metrics downturns, it is not interested in selling DirecTV. Earlier stories suggested the company was considering a possible deal with Dish Network.

Right now, a merger of the biggest satellite TV companies would still result in a massive 32% share of the live, linear pay TV industry -- nearly 30 million satellite video subscribers.

Still, there could be some positive news here.

Currently, Moffett says over half of ongoing subscribers' losses -- the “churn” that DirecTV and Dish both have -- ends up on each other’s platform. This part of their respectively businesses would improve.

All to say should both companies commit to a deal this time, federal regulators might go along.

“Would it be allowed? AT&T and Dish Network have both raised questions about regulatory feasibility, so that’s as good a place to start as any. Our preliminary answer is... yes. Or, maybe. OK, probably. We think.”

This signals that more big media consolidation is coming -- among TV content owners, TV networks, TV station groups, live, linear pay TV business and other services.

We hear about steady “cord-cutting” research affecting many areas of the business. This comes even as both DirecTV and Dish have started virtual pay TV alternatives: DirecTV Now and Sling TV, respectively.

If consumers aren’t finding those new services compelling -- presumably at a better price than existing pay TV options -- where do we go from here? Bottom line: How much would a merger matter long-term?

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