Q. I read your article today about AT&T selling DIRECTV to Dish. Why would Dish want DIRECTV now? Aren’t they losing subscribers, too? What’s the point of buying a satellite TV service in a pandemic, particularly when the business is dying. I don’t get it. And wouldn’t the federal government block the deal anyway? — Ernest, Philadelphia. 

Ernest, I wrote an article today detailing the new Fox Business report that quotes unnamed bankers as saying AT&T basically has no choice now but to sell DIRECTV.

The report, penned by Fox’s Charlie Gasparino, says AT&T shareholders are demanding that the company reduce its debt. And that might be more easily done if AT&T sold DIRECTV which has lost five million subscribers in the five years since the company bought the satellite TV service.

Gasparino notes that Dish, the nation’s second largest satellite TV service, would be a logical buyer.

But why, you ask, would Dish be interested in DIRECTV? Dish has lost almost two million subscribers in the last two years. Why take on another loser in the category?

While Dish is also losing customers to cord-cutting, and the expansion of streaming options, the acquisition of DIRECTV would give it around 27 million pay subscribers. That would make Dish the nation’s largest pay TV company. (Note: Dish has nine million subs; DIRECTV has somewhere between 15 million and 16 million; The Dish-owned Sling TV has 2.3 million.)

With roughly 27 million subscribers, and no competition in the satellite TV category, Dish could stay profitable for years by generating more advertising, and pressuring programmers to offer lower carriage fees. Think of it. Few programmers would want their channels suddenly removed from a pay TV service that reaches more than 27 million homes.

Dish Chairman Charlie Ergen has said he’s open to a DIRECTV merger, even calling it ‘inevitable’ earlier this year. He realizes that a satellite monopoly would allow his company to streamline operations, which would dramatically reduce expenses.

You might say the federal government would frown upon approving a merger that would give so much power to one video company, particularly considering that the FCC rejected a 2002 merger attempt by Dish and DIRECTV. But with the rise of streaming, the pay TV business (cable, satellite, telcos) no longer dominates the video category as it did 18 years ago. Consumers today have a multitude of video options, and the number is growing almost daily.

Dish and DIRECTV could even argue that the merger/sale is necessary now to keep the satellite TV business afloat in the coming years.

For AT&T, the sale would give the company a chance to re-set its strategy, and focus entirely on the streaming business, headlined by HBO Max.

Certainly, AT&T’s denials that any sale, much less one to Dish, is ‘inevitable’ have to be carefully considered. But as the Fox Business report notes, the pandemic is placing even greater strain on DIRECTV, and AT&T’s overall business plans.

If AT&T doesn’t sell now, then what could possibly be its plan for DIRECTV besides watching more subscribers flee?

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— Phillip Swann