Q. I read your article on Dish being part of a DIRECTV merger deal. Is that likely? And how would DIRECTV be run differently if Dish ran it? Would there be better set-tops, more channels, more sports? Would they keep the Sunday Ticket? — Craig, Lubbock, Texas.
Craig, the article you referred to cites a Fox Business report that AT&T may sell a minority stake in DIRECTV to both Dish and Apollo Global Management, an equity firm. Under this scenario, Dish presumably would run DIRECTV with financial assistance from Apollo.
However, news reports from publications such as The Wall Street Journal and the New York Post say AT&T is leery of including Dish in the deal because it could prompt federal regulators to reject it on grounds that it would leave many rural residents with only one viable TV provider. (Internet access, and cable TV service, is limited or nonexistent in some rural areas so streaming and cable are not reasonable alternatives.)
AT&T and Dish could pose a strong argument to the feds that without a satellite TV merger now, the industry could die in the coming years. Satellite sub numbers are shrinking fast with no end in sight. The companies could also include some provisions in the sale, such as a price freeze in the rural areas, that would alleviate the anti-trust concerns.
So for argument’s sake, let’s say Dish is part of a deal to buy DIRECTV, whether it’s a minority or majority stake.
First, it could take several months (or more) for the merger to be approved. But once it is, Dish would have control of what is essentially the nation’s largest pay TV company, even if they remained separate marketing units, DIRECTV and Dish. (Note: Dish has slightly less than nine million subs and more than two million Sling TV customers. DIRECTV has around 15 million subs. If AT&T’s U-verse and AT&T TV Now are also part of the deal, that would add another 3-4 million customers.)
Even if the agreement called for DIRECTV and Dish to be run separately, Dish Chairman Charlie Ergen is clever enough to use the combined power of the TV services to force programmers to lessen their carriage fee demands. (This is why you would immediately see the programmers lining up to oppose the merger.) In the long run, this could enable Dish/DIRECTV to keep subscriber prices lower than if there is no deal. But it could also mean more channel blackouts than DIRECTV customers are used to because Ergen is more inclined to play hardball in carriage negotiations.
As for set-tops and channel lineups, I don’t see Ergen implementing any major changes. The Dish chief has been bearish on regional sports networks in the past, but he knows that the DIRECTV audience tends to be more sports-oriented than most so he might be more likely to carry RSNs than he has with Dish.
And that brings us to DIRECTV’s exclusive contract to carry the NFL Sunday Ticket, which is scheduled to expire after the 2022 season. Ergen knows the Sunday Ticket has been a major subscriber lure for DIRECTV since its inception in 1994. But the cost of renewing the contract as an exclusive would be in the billions. And with pay TV in decline, that might not make sense any more.
Of course, the NFL is already discussing new deals with various companies on different packages, including the Sunday Ticket. So Ergen would probably never get an opportunity to decide on whether to bid on the Ticket. AT&T’s current executive team will likely make that decision sooner than later, if it hasn’t already done so.
The last point I would make is that I think DIRECTV would ‘feel’ like a different company under Ergen. The Dish executive has been in television for decades, unlike AT&T, and he has an innate sense of the TV audience. This would likely translate into a more responsive customer service effort, and some intangible benefits.
Bottom line: DIRECTV under Dish would be different, but not radically so. In an increasingly competitive environment thanks to streaming, Dish/DIRECTV would have to tread carefully to keep revenues up, and subscriber declines down. It’s not a good time for a pay TV company to take too many chances.
Craig, hope that helps. Happy viewing, and stay safe!
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— Phillip Swann