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Directv CEO Says Possible Merger with Dish "Could Be Pro-Consumer"


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#141 OFFLINE   raott

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Posted 26 September 2012 - 04:18 PM

The cost savings would be more in the future of contract negotiations and reduced SAC costs.


In other words, no more up front deals to come to Directv because we no longer have to compete with Dish in the rural areas.
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#142 OFFLINE   Carl Spock

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Posted 26 September 2012 - 04:35 PM

There are two kinds of costs here, raott. You're talking about the cost of the service to the consumer. I think Shades228 was talking about costs of procuring programing for DirecTV. Those are two completely different things.

We really should call the first one price and the second one costs but we often don't. Your remark about lower prices when there is competition is very valid, as is Shades' one about possibly lower costs with a merged company.
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#143 OFFLINE   tonyd79

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Posted 26 September 2012 - 05:09 PM

The cost savings would be more in the future of contract negotiations and reduced SAC costs. Would the bills go down? No but they may not rise at a steady 3-4% a year either.


Not sure I really imagine much cost per unit to go down in contract negotiations. Why would they? It is not like we are going an order of magnitude. DirecTV would go from 20 mil to 35 mil. That is a big jump but not enough to force a big change in pricing, especially as it is assumed that Dish is getting good deals now because they are 15 mil-ish.

What could happen is that DishrecTV thinks they are big enough to push things and there are more disputes.

I am not seeing economies of scale elsewhere either. This is not a paper company where they can just mingle the stock.
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#144 OFFLINE   James Long

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Posted 26 September 2012 - 05:33 PM

Not sure I really imagine much cost per unit to go down in contract negotiations. Why would they?

I would expect a "bulk discount" for a wider distribution ... a channel accepting 20c per subscriber because they are in Entertainment or AT120 and wanting 25c per subscriber if they are placed in Choice or AT200. Knowing that they will make more money off of the additional subscribers in the lower tiers (regardless of actual channel viewership).

Perhaps a combined DirecTV-DISH could offer a channel 25 million viewers at the Choice/AT200 level and expect a better price than when they were only offering 10 or 15 million. The channel provider would only getting 25 million subscribers - even if their payment comes from one company instead of two. So I doubt if there would be a better price.

It may even backfire to the point where channel providers look at the profit the combined company is making and want a bigger cut. If one company can afford to buy the other they certainly can pay higher rates per channel. Right? The channels will always want a bigger piece of the profits.

#145 OFFLINE   Eksynyt

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Posted 26 September 2012 - 06:08 PM

Coincast and the cable companies will pay off whoever they have to in order to prevent this from happening.

#146 OFFLINE   tonyd79

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Posted 26 September 2012 - 06:17 PM

I would expect a "bulk discount" for a wider distribution ... a channel accepting 20c per subscriber because they are in Entertainment or AT120 and wanting 25c per subscriber if they are placed in Choice or AT200. Knowing that they will make more money off of the additional subscribers in the lower tiers (regardless of actual channel viewership).

Perhaps a combined DirecTV-DISH could offer a channel 25 million viewers at the Choice/AT200 level and expect a better price than when they were only offering 10 or 15 million. The channel provider would only getting 25 million subscribers - even if their payment comes from one company instead of two. So I doubt if there would be a better price.

It may even backfire to the point where channel providers look at the profit the combined company is making and want a bigger cut. If one company can afford to buy the other they certainly can pay higher rates per channel. Right? The channels will always want a bigger piece of the profits.


The problem I have is that most of the channels are already in directv and dish households. At levels both companies are happy with. Why would they give a discount just because they are now dealing with one company. That would be asking them to foot the bill of the merger. They won't like that. If the new company sticks to its guns, more disputes.
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#147 OFFLINE   Davenlr

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Posted 26 September 2012 - 06:59 PM

Only consumer benefit I see to a merger would be that the combined company would be able to repurpose satellites to exclusively offer 4K or 8K programming. The cable companies will never have the bandwidth for it. Neither Dish or DirecTv alone, really have the bandwidth for it either.

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#148 OFFLINE   Shades228

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Posted 26 September 2012 - 08:19 PM

Not sure I really imagine much cost per unit to go down in contract negotiations. Why would they? It is not like we are going an order of magnitude. DirecTV would go from 20 mil to 35 mil. That is a big jump but not enough to force a big change in pricing, especially as it is assumed that Dish is getting good deals now because they are 15 mil-ish.

What could happen is that DishrecTV thinks they are big enough to push things and there are more disputes.

I am not seeing economies of scale elsewhere either. This is not a paper company where they can just mingle the stock.


35 million households is over 1/3rd of the population who pay for pay TV. You also have to think of market penetration as well. In some place a dispute may only impact 150k subs in a market because they have a share of that. With the two companies it could impact 300k subscribers.

The problem I have is that most of the channels are already in directv and dish households. At levels both companies are happy with. Why would they give a discount just because they are now dealing with one company. That would be asking them to foot the bill of the merger. They won't like that. If the new company sticks to its guns, more disputes.



It's the increase in rates that is driving the bills. No one is saying that there will be a discount in any sense. What is being said is that it would be much more costly to blackout a channel because it impacts that many people. It also allows a smaller increase because they'll get it from more people. So instead of a larger increase it could be smaller due to the more consistent amount of customers.

There would be other savings as well but they would be offset by other costs so who knows how that would pan out. Advertising would be less than both companies spend but licenses for software users would increase. Then there's the whole getting everyone on the same platform but that's already been discussed.
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#149 OFFLINE   tonyd79

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Posted 26 September 2012 - 09:14 PM

35 million households is over 1/3rd of the population who pay for pay TV. You also have to think of market penetration as well. In some place a dispute may only impact 150k subs in a market because they have a share of that. With the two companies it could impact 300k subscribers.

It's the increase in rates that is driving the bills. No one is saying that there will be a discount in any sense. What is being said is that it would be much more costly to blackout a channel because it impacts that many people. It also allows a smaller increase because they'll get it from more people. So instead of a larger increase it could be smaller due to the more consistent amount of customers.

There would be other savings as well but they would be offset by other costs so who knows how that would pan out. Advertising would be less than both companies spend but licenses for software users would increase. Then there's the whole getting everyone on the same platform but that's already been discussed.


You are proving part of my point. More disputes. Because that will become the big weapon. It is the only weapon. There is no discount because you are not growing the market. You are consolidating the market. And the big company will expect bigger discounts.

As programming is the big cost, that is where they would expect to gain in a merger so it will become more contentious.

Otherwise there is no real economy of scale. You still need the same customer support. The same amount if engineering (maybe more if you plan to merge systems some day). The same installation contracts as you have different systems.

Just the rebranding alone is costly. There will not be fewer ads. There will be more during rebranding.

Mergers like this make no sense. Mergers between commodity companies do. Mergers like Comcast/NBC do from their perspective. No one wins in a dish/directv merger except maybe someone who gets a golden parachute if revenues go up.

When Allied Signal and Honeywell merged, both CEOs got bonuses because they hit numbers in the merger year. They both used the combined numbers.

Beware when a man who is paid by revenues proposes a merger.
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#150 OFFLINE   PrinceLH

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Posted 26 September 2012 - 09:27 PM

I wish that they'd just do a transponder swap and leave it as two companies. Directv gains 110w and Dish gets 119w and any assets in the eastern arc and then call it a day!

#151 OFFLINE   James Long

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Posted 26 September 2012 - 11:03 PM

I wish that they'd just do a transponder swap and leave it as two companies. Directv gains 110w and Dish gets 119w and any assets in the eastern arc and then call it a day!

Can you name the assets?

DISH has 29 transponders at 110, DirecTV has 3.
DirecTV has 11 transponders at 119, DISH has 21.
Trading 29 transponders for 11 (reducing DISH from 82 transponders to 64 on Western Arc) is not a good deal.

DISH has control of 88 transponders serving the US on Eastern Arc. DirecTV vacated their use of 72.5 last year so that isn't something they could give to DISH. Was 72.5 the Eastern Arc assets you were thinking of?

#152 OFFLINE   James Long

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Posted 26 September 2012 - 11:28 PM

Just the rebranding alone is costly. There will not be fewer ads. There will be more during rebranding.

I wonder if they would be better off keeping the brands separate and just sharing satellites and other infrastructure where possible? Keep marketing DirecTV as a premier service worth paying more to have and DISH as a discount service that will save you money. It would not be the first company with competing brands.

Sharing satellite infrastructure would require new dishes and LNBs. DISH makes it easy on their technology to add one more orbital location to their dishes (a complete arc of three orbitals plus one other location). If DirecTV could add a second dish then a single satellite dish aimed at 61.5, 77 or 129 (depending on market) could add HD locals in some markets.

But the real economies may be in the local point of presence. Instead of operating separate receive and backhaul facilities for local channels these sites could be combined. Echostar has an extensive fiber network that could easily deliver received channels to both a DISH and a DirecTV uplink. (Echostar sells capacity on their fiber network to TV stations and others needing a backhaul that reaches every market.)

#153 OFFLINE   Hoosier205

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Posted 26 September 2012 - 11:32 PM

I wonder if they would be better off keeping the brands separate and just sharing satellites and other infrastructure where possible? Keep marketing DirecTV as a premier service worth paying more to have and DISH as a discount service that will save you money. It would not be the first company with competing brands.

Sharing satellite infrastructure would require new dishes and LNBs. DISH makes it easy on their technology to add one more orbital location to their dishes (a complete arc of three orbitals plus one other location). If DirecTV could add a second dish then a single satellite dish aimed at 61.5, 77 or 129 (depending on market) could add HD locals in some markets.

But the real economies may be in the local point of presence. Instead of operating separate receive and backhaul facilities for local channels these sites could be combined. Echostar has an extensive fiber network that could easily deliver received channels to both a DISH and a DirecTV uplink. (Echostar sells capacity on their fiber network to TV stations and others needing a backhaul that reaches every market.)


Associating the DirecTV brand with Dish would only drag DirecTV down. Better to wipe them out, settle the various lawsuits Charlie has invited, and keep what is worth keeping. Chop shop.
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#154 OFFLINE   tonyd79

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Posted 27 September 2012 - 06:33 AM

I wonder if they would be better off keeping the brands separate and just sharing satellites and other infrastructure where possible? Keep marketing DirecTV as a premier service worth paying more to have and DISH as a discount service that will save you money. It would not be the first company with competing brands.


To a large degree, that is what Sirius XM has done. Too many radios out there that are aimed at one company. The shift is coming but it took years and they still brand individually as well as joint. Didn't even clean up the channels on each.

But the real economies may be in the local point of presence. Instead of operating separate receive and backhaul facilities for local channels these sites could be combined. Echostar has an extensive fiber network that could easily deliver received channels to both a DISH and a DirecTV uplink. (Echostar sells capacity on their fiber network to TV stations and others needing a backhaul that reaches every market.)


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#155 OFFLINE   raott

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Posted 27 September 2012 - 06:39 AM

There are two kinds of costs here, raott. You're talking about the cost of the service to the consumer. I think Shades228 was talking about costs of procuring programing for DirecTV. Those are two completely different things.

We really should call the first one price and the second one costs but we often don't. Your remark about lower prices when there is competition is very valid, as is Shades' one about possibly lower costs with a merged company.


Shades mentioned two things, one of them being SAC (subscriber aquisition cost), which is the one I was addressing. I don't think programming costs are in that bucket.

SAC goes down if you don't need to give the customer the moon to entice that customer to come to your service. That can easily happen in a rural area where there is no longer two sat companies to compete against each other. Shades acted like this was a good thing. Probably is for the investor. For the customer, not so much.
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#156 OFFLINE   MCHuf

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Posted 27 September 2012 - 06:48 AM

Associating the DirecTV brand with Dish would only drag DirecTV down. Better to wipe them out, settle the various lawsuits Charlie has invited, and keep what is worth keeping. Chop shop.


Charlie controls Dish Network. He will still be a big player in any merged company. And where Charlie goes, lawsuits will follow, even if the current ones are settled. Do we really want him to screw over 34 million sat customers instead of 14 million?

#157 OFFLINE   maartena

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Posted 27 September 2012 - 12:17 PM

Associating the DirecTV brand with Dish would only drag DirecTV down. Better to wipe them out, settle the various lawsuits Charlie has invited, and keep what is worth keeping. Chop shop.


FCC will never go for that. Dish is not a failing company in financial struggle that can be bought out and chopped up, it is a company that is doing very well financially, and has 14 million customers. They will do perfectly fine on their own, and besides the FCC not approving such a scenario, I think Dish would rather continue on their own than have it being chopped up.

If they ever merge, it will probably an actual merger with a name change. Just like SiriusXM, they would become something like DirecDish or something similar.

Personally, I don't think a merger will happen any time soon. And if they do, they will probably remain two separate companies for many years, while from the top level down they will slowly - say over 10 years - work towards a compatible standard in technology so they can become one company.

Look at cable acquisitions for instance: In 2008, when Adelphia failed, TWC and Comcast bought up the pieces and started dividing up their markets. TWC got all of Los Angeles, and gained all of Adelphia and Comcast in this market, where they gave up other markets to Comcast. That was 2008.

Four years later, my mother-in-law still has a Adelphia DVR, people still have Comcast equipment, and they essentially are STILL running 3 networks with 3 different setups. They even haven't streamlined the channel lineups yet. TWC in my home town has a vastly different channel lineup and channel location as the town my mother-in-law lives in, only 5 minutes down the road.

Dish may be the smaller party in a potential merger, but they would not be absorbed. It is much more likely that IF a merger would take place, they will stay separate companies for at least 5 years with a corporate merger, and then slowly merge into a one-name company that might not carry either name at all. They would have to come up with a technology merging plan first.
[Disclaimer] The definition of "soon" is based solely on DirecTV's interpretation of the word, and all similarities with dictionary definitions of the word "soon" are purely coincidental and should not be interpreted as a time frame that will come to pass within a reasonable amount of time.

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#158 OFFLINE   Hoosier205

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Posted 27 September 2012 - 12:28 PM

FCC will never go for that. Dish is not a failing company in financial struggle that can be bought out and chopped up, it is a company that is doing very well financially, and has 14 million customers. They will do perfectly fine on their own, and besides the FCC not approving such a scenario, I think Dish would rather continue on their own than have it being chopped up.

If they ever merge, it will probably an actual merger with a name change. Just like SiriusXM, they would become something like DirecDish or something similar.

Personally, I don't think a merger will happen any time soon. And if they do, they will probably remain two separate companies for many years, while from the top level down they will slowly - say over 10 years - work towards a compatible standard in technology so they can become one company.

Look at cable acquisitions for instance: In 2008, when Adelphia failed, TWC and Comcast bought up the pieces and started dividing up their markets. TWC got all of Los Angeles, and gained all of Adelphia and Comcast in this market, where they gave up other markets to Comcast. That was 2008.

Four years later, my mother-in-law still has a Adelphia DVR, people still have Comcast equipment, and they essentially are STILL running 3 networks with 3 different setups. They even haven't streamlined the channel lineups yet. TWC in my home town has a vastly different channel lineup and channel location as the town my mother-in-law lives in, only 5 minutes down the road.

Dish may be the smaller party in a potential merger, but they would not be absorbed. It is much more likely that IF a merger would take place, they will stay separate companies for at least 5 years with a corporate merger, and then slowly merge into a one-name company that might not carry either name at all. They would have to come up with a technology merging plan first.


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#159 OFFLINE   Shades228

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Posted 27 September 2012 - 01:33 PM

Shades mentioned two things, one of them being SAC (subscriber aquisition cost), which is the one I was addressing. I don't think programming costs are in that bucket.

SAC goes down if you don't need to give the customer the moon to entice that customer to come to your service. That can easily happen in a rural area where there is no longer two sat companies to compete against each other. Shades acted like this was a good thing. Probably is for the investor. For the customer, not so much.


If SAC goes down then that money can be reallocated or absorbed into profits. If it's absorbed into profites then that means a smaller increase would take place to keep profit margins the same.

You keep saying rural however DIRECTV and DISH are national. They do not have rural pricing so people in rural areas get the benifits of DIRECTV and DISH having to be competitive in markets with multiple options.

Could the company choose to keep the profits and pass on all increases? Sure but they can do that now if they wanted to. So it wouldn't be doomsday for either situation. They wouldn't lose major markets for the sake of trying to get more out of rural markets that would be counter productive.

The largest "negative" I can think of for consumers will be the simple fact that the current game of swapping back and forth would stop and the retention credit aspect would not have to be as much. This again would free up cash flow into profits which could have the impact of lower increases as well.

What it really comes down to is what they would do with the profits. Would they turn into Apple or would they pass the savings along. I think they would do a mixture of both because it's smart business sense.
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#160 OFFLINE   WebTraveler

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Posted 28 September 2012 - 07:29 AM

Just because this is what Mr. White is hoping for does not mean it will happen. While Mr. White may want this, it takes two parties to deal here. Directv stock has been going up, up, and up....and no way a deal will be for Dish to buy or absorb Directv at the current price levels. Companies buy others when they believe the stock price is good deal, not one that is trading at or close to all time highs....

Dish has moved other directions, buying wireless spectrums for future use, absorbing Blockbuster, and other things. It's eggs are not all in one basket. Directv, on the other hand, really doesn't have much other than pay TV in its pocket.




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