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Discussion in 'DIRECTV General Discussion' started by glrush, Oct 10, 2019.
DIRECTV & DISH May Merge & Be Run By AT&T According To a New Report - Cord Cutters News
Cord Cutters can have weird twists and odd interpretations of what is going on around them. Here is a link to the story at Fox Business (more detail here on what this is about):
EXCLUSIVE: Private equity proposal for AT&T spin-off of DirecTV could give Apollo sliver of telecom company
There is a link to the Fox Business article in the article I posted as well.
"If" this were to happen it would continue to be bad for DIRECTV and worse for DISH as long as AT&T is left in control. As the saying goes, "If it's not broke, don't fix it". AT&T has fixed everything that wasn't broke with DIRECTV and you can bet they'll do the same if they acquire and control DISH. This is the company that excels at turning gold into lead.
Thank god ORBY tv has emerged. If that really happens Orby will take off. Many people dont want frikin SPORTS channels. Thats why the dish and direct tv and DISH packages are so costly. Direct tv should break out sports paks totally separate from basic channels. Like the movie premiums. They would crush DISH in new subscribers and keep more current ones from cutting the cord if they did this. Problem is the sports networks would lose millions of viewers and money.
And some of us want a sports only package without all the other “filler” channels we don’t watch.
I doubt anything will come of this, but if it meant AT&T could still negotiate for AT&T TV (and Uverse TV while it is wound down over the next few years) along with all the Directv and Dish (and Sling?) customers it would give them even more leverage. If so it would probably be opposed by the NAB, and probably cable carriers like Comcast and Spectrum, who wouldn't want to see one company with well over 1/3 of all the MVPD subscribers.
I am certainly no MBA, but I don't see the business case for this especially for AT&T. They are still trying to integrate Time Warner and then would try to take this on ? Where are the cost savings ? The analog of course is when Sirius and XM merged but this seems more complicated. Also, there is still the uncertainty of this would past muster with the Feds.
AT&T did such a great job with DirecTV just think what they could do with Dish!
This is along the lines of the kind of deal I've proposed several times in the past. Ultimately, as the satellite TV subscriber base withers away, it just makes sense for these two businesses to merge. And frankly, who else is going to want to buy a declining satellite TV business, either DirecTV or DISH, with the possible exception of its sole direct competitor?
Sounds to me like the idea is for AT&T and DISH to each spin off their satellite TV businesses into a new third company that each side will retain proportional ownership stakes in (with the private equity firm, Apollo, owning the smallest third slice, presumably because they're giving some amount of cash to AT&T and DISH to buy in).
Should such a deal come to pass, the big question, from a consumer perspective, is what this new company would look like. Would it continue to operate the separate DirecTV and DISH brands for some amount of time, each with their own channel packages, pricing and policies? Even if that were the case, there would still be operational cost savings to be had from combined installations, billing, customer service, tech support, etc. Or would it be a full, immediate merger, in which case presumably the DirecTV brand, channel packages, etc. survives while the DISH brand dies? (And if that happened, then whither Sling? My assumption is that Sling's carriage contracts are somehow based in part on the overall DISH business.)
Either way, it's at least possible that customer service could improve for DirecTV subs under the aegis of a new company that's solely focused on that business. I don't think it necessarily matters that AT&T would have a majority ownership stake in the new company. It's still going to be separate from AT&T, and operate under its own management, with lower-level staffing coming from both the DirecTV and DISH sides, I would imagine.
Kind of hard to see Charlie Ergen agreeing to such a deal unless his 5G dreams can become a reality thanks to the T-Mo/Sprint deal ultimately getting approved. Because if that ends up getting shut down via the joint lawsuit from multiple states, then DISH is back to simply being a satellite TV company that owns a bunch of spectrum licenses. I know Charlie says that he'll build out his own new 5G network from scratch either way but I'm still skeptical. But if the T-Mo deal goes through, then at least his company would immediately be in the business of running Boost while trying to build out 5G.
The argument will be that Comcast isn't the competition--Netflix and its 60 million subscribers. It's Disney and their new direct to consumer product that will be peeling content away or at the very least be a second outlet for the same content as on DirecTV/Dish. It's Hulu and Sling and YouTube TV. They're going to argue that OTA broadcasters have consolidated and the market power has shifted too far in their direction and the MVPDs must bulk up to fight against rising retransmission fees. Sinclair buying the RSNs will feed into this as well
And at the end of the day, even if it's 1/3 of the MVPD business, it is shrinking faster than the video businesses of the cable companies so I don't think that will be a huge hurdle
The business case is that this would likely be spun out into a separate company, and AT&T can contribute some amount (probably a large amount) of their corporate debt into the spinoff and instantly lower their debt. The downside to this, is that even though DirecTV is shrinking, they still generate a huge amount of cash (if you take the corporate accounting out of it, they're wildly profitable, generating more cash than they spend) and AT&T needs this cash to pay down debt and also continue to pay out a dividend every quarter. However, if AT&T can offload enough of its debt into this new company, it would be worth it.
Also, like the XM/Sirius merger, times have changed and there is not a clear market for two large "premium" satellite TV providers anymore. They will both continue to shrink, and while there will always be *some* market for their services, if they both stick around until they both go out of business it won't be good for anyone. At some point the market will only be big enough for one of them, and the trick is to get this deal done before you pass that point
The only issue I see with that structure is that AT&T and Dish are going to be fierce competitors in the wireless space. I would probably see this turning into AT&T and Dish spinning out their video businesses and merging them into a third company that is largely independent, with AT&T and Dish shareholders, but not AT&T and Dish directly, owning the resulting company.
As for what the company would look like, this is not a new type of transaction. There is a lot of history to base what the operating plan would be: The DirecTV purchase of Primestar and Sirius/XM merger both provide a roadmap for what would probably happen: They would operationally merge their programming, and very quickly stop adding new customers to one of the systems. And, over time (accelerating as time went forward) transition customers over to the other platform so that they eventually only have one platform to maintain
Be very wary of anything Apollo Global Mgmt puts their hands on. They take on a huge amount of debt and then saddle the companies with it. Look at what's happened to ADT Security since Apollo took it over in 2014. ADT is slowly shrinking.
I wonder how this would impact negotiations with the likes of Sinclair and Nexstar. I don’t like monopolies or losing consumer choice, but in some sense I think it would strengthen the negotiating position because the station owners could not play these two against each other any more.
Still, in the end this is a shrinking market and will almost certainly continue to be such.
Well this will fix everything for everyone
Well, based on the reporting about the deal/structure that Apollo is pitching, yes, it sounds like this new satellite TV company would be technically independent of the parent owners, but given that AT&T would be the majority owner, it seems like they would control the board and effectively be in control of major decisions. Sort of like the situation at Hulu after Disney bought out Fox's 1/3 ownership stake, giving Disney a 2/3 stake to Comcast's 1/3 stake. Disney is basically calling the shots at Hulu now. I suspect it would be a similar situation here, with (for example) AT&T having a 55% stake in the DBS business, DISH having a 37% stake, and Apollo owning the remaining 8%. (Who knows what the actual stakes would be but I'm SWAGing based on the fact that DTV has around 18m subs now vs. 12m at DISH.)
You seem to suggest that this new company would be publicly traded rather than a privately held joint venture, given that you see AT&T and DISH shareholders owning shares in the company, rather than AT&T and DISH directly owning the stakes. But I don't see anything in the reporting to suggest that. Keep in mind that Apollo is a private equity firm.
Yes, I agree, except for the part about merging the programming. I believe a key factor in AT&T management not wanting to completely sell off DTV right now is because all these new carriage contracts they've negotiated with the cable networks cover both satellite and streaming. They need the large customer base of DTV to stay under AT&T ownership/control so that the new AT&T TV can offer the same channel packages as DTV and benefit from the same relatively low carriage rates that AT&T has negotiated on the basis of having over 20 million total subscribers.
It's at least plausible that AT&T could agree to the kind of deal that Apollo is pitching because it would leave them as the majority owner of DirecTV. My guess is that the merger of DirecTV and DISH would simply mean that the DISH brand gets killed and the DirecTV channel packages become the only set of options offered to new customers. But, to the extent that they could do so, they would allow existing DISH customers to stay on their old channel packages (e.g. America's Top 200, etc.) as long as they wanted, because forcing a subscriber to change packages is a good way to run them off.
I do think the combined business would try to spend as little as possible on replacing customer equipment and definitely try to avoid sending out installers to replace DISH dishes and wiring with DTV systems. As you suggest, all new installations would get DTV systems installed, pointed at the superior fleet of DTV sats. I think they'd likely come up with two different versions of the same set of receivers/DVRs (with all having the same UI), one for each type of installation. Given that the Hopper line is more advanced than the Genie line, I'd see them just taking all their existing Hopper and Joey boxes and creating a new DTV-compatible version. That would be the version given to all new installations, as well as to upgrading customers on existing DTV installations. For those customers on existing DISH installations who need a replacement/upgrade box, they'd be sent the original DISH-compatible version of the Hopper.
Be patient ... if AT&T keeps losing 4% of their subscribers each quarter (as they did in 2Q 2019) the gap will close.
(Is the 18m you quote "satellite only"? AT&T hasn't separated out satellite subscribers since the end of 2018.)
Looking forward, I'd be more concerned with streaming subscribers. AT&T has reported around 6% of their subscribers are streamers. DISH is around 20% streaming subscribers. If one believes that streaming is the future one should favor the company that has nearly twice as many streaming subscribers and has not reported a negative quarter for streaming subscriptions - not one that hasn't had a net gain in streaming since 3Q 2018.
Ha! You may be right.
Yeah. And as I said, "around 18 million" because I didn't feel like doing the research again to get a firmer figure. I did it awhile back and, yes, this year AT&T has been reporting quarterly numbers that combine DTV sat with Uverse TV. So you have to take a few million off that to get to just satellite. At any rate, analysts are expecting that DTV will lose something like another 1m subs in Q3 alone, which would be absolutely brutal. Guess we'll find out on the next quarterly earnings call, Mon. 10/28. (The Wall Street dog-and-pony show for HBO Max is the next day, 10/29, BTW.)
I see your point but I still believe that the future favors AT&T in streaming over DISH/Sling for a few reasons. First off, I don't think AT&T has really been all that serious about streaming TV so far. I think DTV Now was just their public staging ground for getting both the technology and the business contracts in place. That's all taken longer than I would have thought (and also longer than AT&T leadership had said it would), but it looks like the final pieces are falling into place soon. So let's see how AT&T TV and AT&T TV Now fare once they get the engine firing on all cylinders in 2020.
Next, I'd say that AT&T's streaming ambitions have a huge advantage that DISH doesn't have: their own very large, high-quality pool of content that will fuel their own direct-to-consumer on-demand service, namely HBO Max. You watch and see: HBO Max will be bundled in as part of AT&T TV's channel packages (and those channel packages, conversely, will become available as add-ons to the core on-demand HBO Max service inside that app too). Those things will synergistically fuel each other. Add to that the fact that AT&T already has a big business in cellular service and a significant one in home broadband -- subscriber bases to whom they can sell bundles including their new streaming products -- plus the fact that AT&T's Xandr division is building a data-enabled targeted advertising business that dovetails with all the above -- and you can see how AT&T has some major advantages over DISH and Sling.
Now, I'm not poo-pooing Sling, per se. I do think that they've carved out a niche on the low end of the cable TV game. They basically serve folks who want to spend as little as possible to get an incomplete skinny bundle of channels that include a few big ones they care about, like ESPN. Depending on where you live, Sling is missing all or most of your local broadcast networks, but if you can get those via antenna, then maybe you don't care about that.
If you take a look at which channels you get in which packages from Sling, and the cost of those packages, and then you compare that to other options like the $45/mo Hulu Live, you'll see that Sling doesn't make sense for all that many folks. Essentially, Sling only makes sense if you just want either their $25 Orange core package (which includes ESPN and other Disney cable nets) OR their $25 Blue core package (with includes NBCU and Fox-owned cable nets, but NOT Fox News or MSNBC). And again, note that those packages don't include ABC or NBC/Fox, respectively, unless you happen to live in a market where that network owns your local affiliate. (CBS and CW affiliates aren't carried by Sling anywhere.) Also note that all those Fox Sports RSNs have left Sling too, so they're not in the Blue package any more. Need cloud DVR? That adds $5, taking you up to $30. Still though, that's the cheapest way to get ESPN (Orange) or FS1 + NBCSN (Blue). But if you combine Orange and Blue, then you're up to $40, or $45 if you add the cloud DVR. At that point, you're almost certainly better off with the $45 Hulu Live, which does include your major locals, your RSNs, and a well-rounded bundle of national sports, news and entertainment cable channels with cloud DVR, plus the base Hulu on-demand service, which offers a growing number of Hulu Originals (in 4K) plus Hollywood movies, past seasons of broadcast, cable and premium series, etc.
See why I think that Sling -- at least as it's currently structured -- has a very real ceiling in terms of its ability to attract customers? It's just missing too many channels, is too gimped in terms of its feature set and, most importantly, once you try to build a set of channels on Sling that will appeal to the vast majority of consumers/households, it's no longer price-competitive with Hulu Live and YouTube TV. And price is the only real reason to use Sling in the first place.
I know you are enamored of what you think ATT will do going forward, but that assumes lots of facts not in evidence! . Their focus seems to be as a cable/sat replacement service with a bit of HBO thrown in for good measure. That might turn out to be a good move, but not having released any of that yet means we don’t know.
As you note, Sling is very good for those wanting to save money. What I found, and in reading in lots of places, streaming people seem to have a mix like this now:
Amazon Prime (as much because it is essentially free)
And to a lesser extent - CBS All Access
When you have those, then Sling can fill in some holes like local broadcast channels. You mention CW, but that one is easy and free since CW app is free for all unlike many of the channel specific apps. NBC is coming out with its own free version for all too. So that leaves Fox (hulu), ABC (hulu). Yeah, you have to wait until the next day, but if you normally DVR, so what?
As with Dish, Sling is not the best for sports fans, but streaming and sports isn’t really great anywhere yet. Especially live sports.
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I agree. Comparing a fictional AT&T (one that would only exist if a lot of changes and reversals are made) against the real (and successful) Sling TV isn't a fair comparison. AT&T's actual changes have hurt their streaming business.
I can see them being successful as a content provider (their content) but to be successful as a MVPD they need to be more like Sling TV.
DISH knows how to run a successful streaming service.