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DirecTV CEO: “Never Say Never” To A Merger Deal With Dish Network

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#1 ·
DirecTV CEO: "Never Say Never" To A Merger Deal With Dish Network

This was a lousy day for DirecTV after it reported lower-than-expected earnings, with especially weak results in Latin America. But CEO Michael White gave investors at least one reason to stick with the company: He signaled in a call with analysts that he'd be receptive to the idea of a merger with Dish Network. "I don't think it's productive for me to speculate what regulators may or may not do, but the competitive landscape is very different than it was 10 years ago" when the FCC rejected a Dish-DirecTV merger plan, he said.

For one thing, "the balance [of power] between content distributors and providers is out of whack." He has long charged that programmers are demanding dangerously high new fees for their content -a position he reiterated today. "I've seen more customer complaints about the price increases," he says. "My own view is that it's not going to change in the short term. But it's clear that this isn't sustainable beyond the next couple of years. Something is going to have to give."

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#27 ·
IMHO a merger would be fought tooth-and-nail at the FCC and in Congress by the content providers and the cable companies. The combined customer base would represent a too powerful force in negotiations.

That's what I would have said only a few years ago before Comcast took over NBCU. Now, who knows? Congress members aren't cheap, but that's a lot of money the two companies can leverage.
 
#30 ·
Drucifer said:
Just how dd the XM Sirus merger work out for the consumer?
They didn't raise their prices for three years, a promise they made when the merger was proposed. Since the 2008 merger they have raised the base price from $12.95 to $14.49 a month. A $1.45/mo increase in five years. Not bad.

Although, I'm not sure it's a fair comparison with DIRECTV and Dish. SiriusXM has much more competition...most of which it free.

Mike
 
#31 ·
Mike Bertelson said:
As I've said, I don't think it'll happen but there is still plenty of competition. The top ten we could name off the top of our heads and a couple of dozen more. Competition won't be a problem.

Mike
Unless you live in a rural location. DirecTV or Dish is the only option where I live. No cable TV, much less cable broadband. We do have DSL from CenturyLink, when it works. So if you are in rural America, there is virtually no competition.
 
#32 ·
Mike Bertelson said:
Although, I'm not sure it's a fair comparison with DIRECTV and Dish. SiriusXM has much more competition...most of which it free.
SiriusXM took two companies that managed to convince the government that neither would survive without a merger and let them work together as one. At this point neither DirecTV nor DISH are approaching the point of not surviving ... it is an issue where both could make more money by combining operations and reducing competition - not one of survival.

The FCC is still holding out for a new entrant in the satellite TV marketplace (something that could not have happened with Sirius and XM with the way the spectrum was assigned). A merger would probably be good for DirecTV and DISH - but it wouldn't be good for most of their subscribers.
 
#34 ·
The FCC still has not permanently assigned DISH the final two transponder slots on 61.5. DISH can use them only under special temporary authority. The FCC's stated reason for not making a permanent assignment was to allow for a new entrant.

What a new entrant will do with only two transponders at 61.5 is a mystery. SkyAngel operated their service off of two transponders (loaning the other six to DISH in exchange for use of the satellite). With MPEG4 someone could put up a small satellite service but with the cost of a satellite they would probably end up leasing transponders from DISH (unless they buy a used satellite).

SkyAngel moved to IPTV (trading LOS issues for lack of broadband service issues) in order to survive. GloryStar remains in business as a FTA option for people wanting that niche of programming. The last small satellite company was Voom ... who could not pull off a successful service with 13 transponders (11 licensed, 2 temporary). I don't see a two transponder operation being feasible but the FCC holds out hope.
 
#36 ·
One thing no one has mentioned is that pay TV is a mature market, at least in the US. Anybody who wants pay TV has it, a new entrant would only take customers from other providers. What advantage is there to anybody in splitting the pie into smaller pieces, especially considering the very high capital costs of setting up a satellite service? Even phone companies have realized that the upgrade costs to their physical plant is not cost effective, Verizon has put FIOS expansion on hold and since the CenturyLink purchase I have not heard a word about Qwest's attempt to get into the TV business.

On the competition/pricing issue I am not too concerned as the fact is the great majority of satellite customers are urban and satellite is just a choice, not necessity. As much as I dislike cable I know I would switch if it was 20 -30% cheaper and I doubt they are willing to give up that many customers
 
#37 ·
Mike Bertelson said:
They didn't raise their prices for three years, a promise they made when the merger was proposed. Since the 2008 merger they have raised the base price from $12.95 to $14.49 a month. A $1.45/mo increase in five years. Not bad.

Although, I'm not sure it's a fair comparison with DIRECTV and Dish. SiriusXM has much more competition...most of which it free.

Mike
And the choice to choose is gone.
 
#39 ·
Mike Bertelson said:
They didn't raise their prices for three years, a promise they made when the merger was proposed. Since the 2008 merger they have raised the base price from $12.95 to $14.49 a month. A $1.45/mo increase in five years. Not bad.

Although, I'm not sure it's a fair comparison with DIRECTV and Dish. SiriusXM has much more competition...most of which it free.

Mike
Instead of raising their prices, within a year of the merger they: began charging almost $3 a month for internet access, which was free pre-merger; raised a rates on multiple radios by about 30%; and added a "music royalty fee". Whether the base price was not changed is meaningless when the out-of-pocket cost post merger was substantially higher than pre-merger for many customers.
 
#40 ·
longrider said:
On the competition/pricing issue I am not too concerned as the fact is the great majority of satellite customers are urban and satellite is just a choice, not necessity. As much as I dislike cable I know I would switch if it was 20 -30% cheaper and I doubt they are willing to give up that many customers
I doubt that even the majority of sat. subs are urban. Where does this info. come from?
 
#41 ·
Laxguy said:
I doubt that even the majority of sat. subs are urban. Where does this info. come from?
Honestly that was an assumption from my observations that I see just as many dishes in the suburbs as I do in rural areas and that 83% of the US population lives in urban areas. Reexamining it I realize my observation is biased by the fact that out west there are no real high density areas however I still would have a hard time believing that a satellite company would sacrifice a good percentage of urban customers by going crazy with pricing
 
#42 ·
Agree with your conclusion. When I think "urban" I exclude "suburban", so there'd be a big gap in our respective numbers. I'd still love to see definitive numbers on satellite groupings especially: Those with choices besides satellite; those with good choices besides satellite, and those who can get only satellite.
 
#43 ·
Urban has more competition and harder to place dishes. OTARD helps if the dish can be placed within OTARD's protection but otherwise one has to rely on their landlord or own the property. Suburban areas have more options for dish placements and more single family homes with exclusive use areas. But there is still competition from at least a cable company and OTA. Rural areas get away from cable competition and even OTA can be lost - and the Internet may be hard to get. There are some areas satellite has a hard time reaching and others where it seems to be the only option.

Is there effective enough competition to allow a merger between the only two satellite providers?
 
#46 ·
I don't think there should really be any concerns as far as competition, since satellite competes with many cable companies as well as OTA and broadband options for some people (depending on their viewing habits)

While it is true that there are some people for whom satellite is the only option, that's not really a problem because there isn't discriminatory pricing of satellite depending on where you live, as there is for cable. As an example, where I live there is only one cable company. A slightly larger city a half hour to the north has the same cable company, plus a second one. My cable company's prices are about $15 less per month for the same exact package in the other city, because they have competition and we do not.

Satellite doesn't work that way, a Directv subscriber in the middle of nowhere who has no cable or broadband option pays the same for Directv as someone in a big city who has four cable companies and a ton of broadband choices. All subscribers pay the same price nationwide, based on their package, other than a few dollars more in areas that have a lot of RSNs.

If Directv and Dish merged and then tried to raise prices because there was now no competition for "satellite TV", they'd lose a lot of subscribers in the areas where people have many options. The money that would cost them would far outweigh them being able to make more money from the people who have no or only one alternative - and obviously even they all have some point where they'd go without TV entirely if the price was increased too much.

Buying out Dish would allow Directv to either become more profitable while still charging the same prices, or become more profitable by lowering prices and adding even more subscribers. Satellites aren't cheap, but you need the same number of satellites whether you have 1 million subscribers or 100 million, so the more subscribers the better so the 'per subscriber' cost of building/launching/operating the satellites is reduced.

Obviously they'd be stuck with the cost of operating both satellite fleets for a while, since they can't switch everyone over to Directv overnight. It would take several years at a minimum. But they'd never need to launch any new satellites for the Dish subscribers, and if the Dish Network satellites still had some useful life left after they switched everyone over to Directv, they could be sold/rented to others similar to what they did with the old 72.5* satellite that Russia is leasing.
 
#47 ·
And the choice to choose is gone.

Ummm....There's a lot of choices. It's radio and while there's only one satellite source there are still plenty of choices...most of which is free.

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#48 ·
I can't stand dish if DirecTV becomes dish I will switch to cable.

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If a merger does happen it's years, maybe even a decade out.

Mike

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#49 ·
Unless you live in a rural location. DirecTV or Dish is the only option where I live. No cable TV, much less cable broadband. We do have DSL from CenturyLink, when it works. So if you are in rural America, there is virtually no competition.
The percentage of households whose only choice is satellite is no where near enough to sustain a DBS provider. They will have so make their money in the big DMAs...which means they will have to deal with lots of competition.

I believe their pricing will have to based on the big markets and not the little ones without competition.

Mike

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#50 ·
The percentage of households whose only choice is satellite is no where near enough to sustain a DBS provider. They will have so make their money in the big DMAs...which means they will have to deal with lots of competition.

I believe their pricing will have to based on the big markets and not the little ones without competition.

Mike

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I understand that a rural only provider cannot work, however in any case, the FCC should make some provision for price controls in areas where there is no competition. Either that or the government helps to subsidize the cost where there is no competition.
 
#51 ·
bobvick1983 said:
I understand that a rural only provider cannot work, however in any case, the FCC should make some provision for price controls in areas where there is no competition. Either that or the government helps to subsidize the cost where there is no competition.
I'm sorry, but those concepts are anathema to free markets- we've still got some left!
 
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