TV Answer Man, can you explain why DIRECTV and Dish would be interested in becoming one company? It’s been great over the years to have two satellite dishes to choose from where we live. We don’t have a good Internet service and cable is so terrible at customer service. — Edward, Solomons, Maryland.
Edward, DIRECTV and Dish are discussing a merger, according to an article this week from the New York Post. There are several reasons why the two companies may now be interested in becoming one, including:
1. Satellite TV’s Shrinking Audience
DIRECTV has lost at least six million subscribers since 2015 while Dish has lost more than three million during that time. The explosion of streaming services, and rising prices forced by escalating fee demands from programmers, will undoubtedly trigger more customer defections in the years ahead. DIRECTV and Dish realize that there’s no longer room for two satellite services. They must combine to create one company that can successfully compete in today’s market.
2. Rising Programming Fees
As one company, DIRECTV and Dish will have nearly 25 million subscribers (also counting Sling TV, DIRECTV Stream and U-verse). That will give the new company greater leverage to negotiate favorable carriage deals with the programmers which would reduce its program acquisition costs.
3. Reduced Expenses
The merger would also allow the new company to reduce expenses by eliminating certain services and employees that overlap.
4. More Favorable Regulatory Environment
DIRECTV and Dish actually tried to merge two decades ago, but the FCC nixed the deal on grounds that it would be anti-competitive. The companies haven’t officially tried to merge since because federal regulators would likely have the same view. However, the growth of streaming, and the federal government’s plan to expand Internet access in rural areas, will make the video business highly competitive in all markets. (Until now, many rural residents have had only two choices for quality TV: DIRECTV and Dish. Streaming hasn’t been an option due to limited Internet access.) Consequently, the FCC and Department of Justice should be more inclined to approve a satellite merger.
5. Dish Needs Money
Dish is building a 5G communications network and it’s been a struggle both logistically and financially. The company needs an infusion of cash to keep the initiative on track. The merger would likely help Dish raise more capital.
6. TPG Wants It
AT&T sold a 30 percent stake in DIRECTV (and U-verse and DIRECTV Stream) a year ago to private equity firm, TPG. The investment group didn’t buy the minority stake because it was enamored with satellite TV technology; it wanted to make money. The merger could give TPG an early escape route after making a tidy profit on the merger transaction.
The above reasons and a few other intangibles are why I predicted last year that DIRECTV and Dish would merge in 2022. Of course, with Dish Chairman Charlie Ergen involved, the deal could go south. (Ergen is a tough negotiator who’s unafraid to walk away moments before final signature.) But I suspect Ergen is highly motivated to make this work.
Happy viewing and stay safe!
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— Phillip Swann