By Phillip Swann
The TV Answer Man – @tvanswerman

TV Answer Man, if there’s no merger with Dish, can DIRECTV survive? It seems like it’s losing so many subscribers that it can’t stay in business much longer. What is your take? — Zack, Boston. 

Zack, many industry observers have assumed for months that DIRECTV and Dish would merge this year to form one company that could better compete against the multitude of video choices, particularly streaming. The merger would also allow the new company to save money with the elimination of duplicate personnel and departments.

However, the New York Post wrote last week that Dish Chairman Charlie Ergen’s attempts to merge with DIRECTV have stalled. The article did not provide a specific reason, but it could be Dish’s current financial woes. Ergen’s company, which is already contending with the loss of millions of satellite customers, is also struggling to generate funding for its new 5G wireless business.

The Post report does not suggest the merger is dead, but what if it is? Can DIRECTV, which has lost at least 12 million subscribers in the last eight years, survive as an independent company?

The answer is yes, depending, of course, upon your definition of survive.

DIRECTV has three video services: DIRECTV’s satellite service, DIRECTV Stream, and U-verse. The satellite service undoubtedly will lose more subscribers in the coming months and years as more consumers cut the cord and sign up for less expensive Video on Demand streamers such as Netflix, Max and Disney+. DIRECTV Stream has also struggled to gain market share in the live streaming category and U-verse is on a rapid race to the bottom. (The company has said for a few years that it’s not even taking new subscribers for U-verse.)

But the three combined still have more than 10 million subscribers, perhaps as high as 12 million. (DIRECTV hasn’t reported public subscriber totals since 2021 when AT&T sold a 30 percent stake in the company to private equity firm, TPG, and established it as a separate entity.) The company also has a commercial unit which distributes video services, including the NFL Sunday Ticket and Thursday Night Football, to more than 300,000 venues, including bars and restaurants.

With 10-12 million subscribers, and a flourishing commercial business, DIRECTV can still make money, particularly if company executives are wise where they spend. The company will have to make difficult choices regarding which channels it carries and which departments deserve investment. With subscriber numbers still declining rapidly due to cord cutting, every expenditure has to be scrutinized to ensure that the company remains profitable.

The question is how long could DIRECTV operate like this?

I think it can be several years, perhaps a decade or more if DIRECTV is able to shift the company’s residential business from satellite to streaming. That’s more difficult than it sounds — various company executives have taken a shot at it over the last seven years — but it has to be done. The satellite business is dying, and as more rural communities get Internet access in the next several years, eliminating the need for a dish for entertainment, the end will come faster. (DIRECTV’s satellite fleet also is aging and the company has not announced plans to replace it with new launches.)

Bottom line: The economics suggest that DIRECTV and Dish will still merge at some point. Both companies are weaker as independent entities. But if the merger is dead, or delayed indefinitely, DIRECTV will continue to operate as a profitable business.

And what about Dish, you ask? That’s a more complicated question thanks to Ergen’s pursuit of the 5G business. If the Dish chief can pull that off, it will allow him to use the wireless service to boost his video services, particularly Sling TV. If he can’t pull it off, bankruptcy may be ahead.

Zack, hope that helps. Happy viewing and stay safe!

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— Phillip Swann