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Discussion in 'DIRECTV General Discussion' started by icr2002, Jun 7, 2019.
Dish open to merging satellite TV business with AT&T's DirecTV: report - Reuters
It doesn't make sense to do this. There are very few syngeries possible between Directv and Dish today, because it would take so long and cost so much to convert Dish customers to Directv dishes/hardware that they'd never get a payback during the remaining expected life of satellite service (I'd give Directv until the early 2030s before they need to start replacing satellites, and it probably can't be justified at that point)
Now I'd totally expect a UBS analyst (the original source) to write something like this - they're an investment bank who make money off M&A fees and the M&A fees for an acquisition of Dish would be worth hundreds of millions if not billions to whoever underwrites it. That doesn't mean it makes sense for the companies to actually merge.
This would have made sense a decade ago, but would be stupid today. Not to mention that AT&T already carries massive debt and probably would have a hard time borrowing more, especially to buy another satellite TV company.
With all the talk of AT&T "shutting down" DIRECTV satellite perhaps it is worth keeping one's mind open to a DISH led merger. It was DISH that led the failed merger back in 2002 (with a $690 million dollar merger termination cost ... but DISH has not had a non-profitable year since 2003). DISH showed some interest in buying DIRECTV when AT&T bought the service in 2015. It may not be a good idea ... but I am not surprised that DISH is still interested.
At some point AT&T will decide that they will get more money out of selling the DIRECTV system to another operator than to keep it running. I don't expect that to be within the next 10 years, but I do expect it to happen.
One of the staff members over at the other forum, Scott Greczkowski, posted this:
I do see them eventually merging. Charlie said at Team Summit he would likely buy DIRECTV some day.
If it happens, it'll be well before 10 years from now (at which point the DBS TV business will be a shriveled husk of its present self, if it even still exists).
And I'll paste in here the same remarks that I posted over there:
I don't understand this thinking that if DISH and DTV were to merge that they would be crazy enough to sink a ton of money on converting all existing customers over to the same delivery platform. WHY?! If DISH acquired DTV, that doesn't mean the DTV satellites would fall out of the sky. They'd just take over the uplink to those satellites and feed their own signals and channel packages through them. For all new subscribers, sure, they'd probably standardize on one set of satellites or the other. And maybe any new and replacement receivers sent out would be Hoppers (bye-bye Genie), although they might have to come up with a slightly different version of Hopper hardware to work with the DTV dishes and other installed hardware.
Despite having to maintain a separate legacy delivery platform/fleet of sats, the combined company would still realize efficiencies from combined billing, installation, and customer support. And, more importantly, by having a larger subscriber base, they could command better pricing when negotiating carriage contracts with the cable networks. But the biggest advantage the combined company would have would come from the fact that, for the "captive audience" for satellite TV -- those rural dwellers with no other options -- they wouldn't have any real competitors, so they wouldn't need to compete on price any more. You guys realize that both DISH and DTV would charge even more if they didn't have to worry about customers choosing the other one instead, right?
Logistically it would be complicated ... first, leave DISH out of the equation and imagine AT&T selling DIRECTV. What would they actually sell?
If AT&T sold the satellite system (satellites, uplinks, backhauls, customers) and kept their OTT services and UVERSE how would their carriage contracts work? AT&T considers UVERSE to be "premium TV" and includes the UVERSE subscriber count in their satellite subscriber count. The concept of shutting down UVERSE TV and hoping customers sign up for DIRECTV NOW has been floated, but that would be contrary to AT&T considering UVERSE to be "premium TV". But assuming the sale was far enough down the road where DTV NOW is actually a successful business and the number of UVERSE TV subscribers has dropped. They could transfer their remaining UVERSE TV customers over to OTT streaming.
That would leave AT&T with two distribution chains ... satellite vs streaming. Both under the same carriage contracts with the content providers. Selling both together to a willing buyer (not necessarily DISH) would be the easiest. AT&T could retain streaming of their own content (HBO and Time Warner) and sell them similar to any other content provider such as Disney or Viacom. What would be more difficult would be if AT&T decided to sell the satellite service business separately from the streaming service business. Their contracts cover both satellite and streaming ... they have used that synergy to get better deals from content providers. The only way I see a split working is if the number of satellite viewers drops to the point where the remaining streaming providers is still a significant subscriber base for AT&T to use in negotiations. Current trends are not showing huge growth in streaming.
So, assuming that AT&T gets to a point where they want to sell the satellite business or satellite plus DTV NOW (keeping streaming of HBO and other AT&T content as a separate business). They would need to find a willing buyer. Perhaps some venture capitalist group with a dream or an employee owned company. They would need to find a buyer who believes in satellite and is willing to go ALL IN on satellite delivery. DISH fits that description.
DIRECTV's changes to technology are making it easier for the systems to be merged. The conversions to MPEG4 make their signals compatible with DISH receivers. There are huge differences in receiver designs, but that can be adjusted in firmware. It should not be impossible to teach a Hopper/Wally to speak SWM or a DIRECTV receiver to speak DISHPro Hybrid - if needed. But I would not expect a physical merger to be immediate.
I'd expect a DISH and DIRECTV merger to look a lot like the SiriusXM merger. Sirius and XM have been merged for nearly 11 years and still run two incompatible satellite systems (XM sats cannot be received by Sirius only radios, Sirius sats cannot be received by XM only radios). SiriusXM has radios that will receive both services, but they still sell Sirius and XM only radios. And their subscriber base has grown since the merger. The thought that DISH|DIRECTV would need to immediately physically merge is incorrect.
The compatibly between systems would make it easier to have some level of signal sharing. The first immediate change I would make would be to transition the DIRECTV transponders on 110 and 119 to DISH service (something that has been talked about without needing a full merger). I would also allow DIRECTV equipment to use the DISH signals at 110 and 119 (along with 101) to provide a full MPEG4 DBS service that is compatible with mobile dishes in HD. Home and business viewers could continue to use the DIRECTV Ka satellites.
If the satellite business is sold contracts would not immediately change (unless there is something written in to the current contracts that require a certain subscriber count to maintain price). DISH contracts with providers would continue - DIRECTV contracts with providers would continue. As it has been with DIRECTV and UVERSE, it would take a few years for combined contracts to be written and come in to effect. Both companies also have contracts with their subscribers that would need to be maintained for two years (any drastic change in terms would release those customers).
If AT&T also sells DTV NOW that could be combined with SlingTV. I'd expect that combination to occur quicker than combining the satellite services (no subscriber commitments to honor - but distribution contracts could still slow down a physical merger of services). At this point I have a hard time seeing AT&T keep DTV NOW as a full service streaming service (with third party content) if they sold the satellite distribution. But the sale isn't being made at this point ... it would be made at a future point where AT&T would make more money off of the sale of DIRECTV than they make off of continuing to run the service.
One other thought would be if AT&T sold the system without selling the service. Again, I am talking a decade away (at least) but if AT&T wants out of the satellite distribution service they could shut down DIRECTV satellite and sell the satellites and uplink centers as assets. I believe they would get a better price if they sold DIRECTV satellite with customers, but ten years down the road the difference may not be enough to worry about. Selling the assets would be similar to what Dominion broadcasting and Cablevision did with their satellite assets (licenses, leases and Cablevision's satellite). Dominion and Cablevision did not sell their service or customers to DISH, they sold their distribution assets. (Separate deals were made to continue some Dominion and Cablevision produced programming on DISH after the asset sale.)
As a final thought (keeping an open mind) I am willing to consider AT&T buying DISH. But I believe that there are more compelling reasons for DISH, a company focused on satellite TV, to buy DIRECTV than for AT&T to buy yet another satellite company. There would be some benefits (better access to mobile customers via DBS satellites) but not enough benefits to make the purchase worthwhile for AT&T.
Good points. I think things get complicated for AT&T when it comes to streaming TV. I don't think they want to completely get out of the MVPD business any time soon. In fact, in a CNBC story published just yesterday, Stankey says that eventually they want to offer streaming cable TV bundle service (what we currently call DirecTV Now) inside of their upcoming SVOD app (possibly called HBO Max).
Which makes sense -- HBO Max will be AT&T's competitor to Disney's Hulu (or, I suppose a bit more like if Disney combined Hulu and Disney+ into one service). As you know, Hulu offers the ability to add a bundle of live cable channels that integrate into that same app. And just as one can add other a la carte services to Hulu, including Showtime and Starz, Stankey foresees their HBO Max app doing the same. Basically, it seems that everyone in the SVOD game except Netflix has ambitions for their app to do two things: 1. Offer a base-level collection of on-demand content, the great majority of which they own and which is exclusive to their service/app. 2. Be an aggregator of smaller/second-tier third party video services in the same UI. Those services are other SVODs and/or linear cable channel bundles. Netflix obviously does #1 but not #2. Hulu, Amazon Prime Video, and Apple TV+ do both. I suspect that Comcast/NBCU's forthcoming SVOD will, a few years from now, do both as well, with Comcast eventually deciding to sell their Xfinity TV cable bundle service not just within their own footprint but nationally as an OTT service.
In fact, if you think about it, it's not hard to imagine several years from now that virtually the only way to get live cable TV -- outside of DBS -- will be through nationally distributed OTT services, only two of which -- Comcast Xfinity and AT&T -- will be offered by network operators. And the reason for that is that they're the only network operators who are also content owners. Everyone else -- Charter, Cox, Altice, Verizon, Frontier, CenturyLink -- gets out of the game and is content to make money on broadband while partnering with one of the big OTT TV services to pitch as part of their bundle. (We're already seeing signs of this now.) They'd zero-rate the data for their partner TV service against their broadband and could dynamically enable multicast for its linear channels just as easily as on a home-grown IPTV service. Might offer an Android TV box customized for that specific service, whether it's AT&T TV or YouTube TV or Hulu with Live TV, etc.
Sorry, I went off on a rabbit trail. Back to DBS. Whether or not AT&T might try to somehow divest DTV would, I think, depend on a lot of things that we just don't know surrounding their distribution contracts with cable network and local station owners. If AT&T retained a minority stake in DTV, with DISH taking the majority share as well as operational control (which is kinda what the original UBS analyst report from a couple days ago envisions), would AT&T's current/new set of carriage contracts that span both DTV and DTV Now stay in place, even if DTV Now was fully retained by AT&T? As James Long points out above, existing contracts and channel packages for both DBS services would likely stay in place for some time after the transaction before getting merged into unified packages when the contracts get renegotiated and renewed.
That kind of scenario might allow AT&T to retain and grow DTV Now (which I believe will soon evolve a bit and relaunch as "AT&T TV") over the next 2-3 years. They would aim to transition their entire Uverse TV base (i.e. all those with AT&T Fiber/Internet broadband) over to AT&T TV during that time period, while also growing nationwide OTT distribution of the service through its own standalone app and, eventually, as an add-on inside of the HBO Max app. I also expect that they'll try to sign up CenturyLink as a distribution partner of AT&T TV to their own home broadband customers. (CenturyLink has already deprecated their Prism IPTV service -- based on the Uverse IPTV platform -- and instead hawks DTV satellite as a bundle option.) By the time that the 2019 set of DTV/DTV Now carriage contracts expire (in, say, 2022?), AT&T would hope to have a sufficient user base on AT&T TV to be able to negotiate decent rates with all those various network owners then.
I remember when people said XM and Sirius would never merge, and that sat radio would be dead in a few years. That was well over a decade ago.
I'm not sure why people think sat TV will go away. Rural people (many millions) still have no other way to get service other than locals. 5G is certainly not the answer.
I always said sat radio would have to merge to survive. And how much money does it actually make? Not much. I think it’s new cars keeping them in business with previews for a few months.
I could see all kinds of issues beyond the satellite system being spun of off DIRECTV. They likely use the same massive fiber backhaul system around the country for streaming as well as tv everywhere and they’d have to figure out licensing deals. I don’t think att would ever let go of the fiber bandwidth. Of course I think people are kinda crazy thinking att is just going to let all that sat bandwidth go dead and kill off satellite someday.
29 Million SiriusXM subscribers. Nearly twice the number they had at the time of their merger. Revenue of $1.5 billion for the quarter.
SiriusXM Reports First Quarter 2019 Results
There is absolutely zero chance of any kind of merger between these two satellite companies.
I'm shocked there are so many. Must be a lot of new cars coming with a trial subscription, or maybe fleet cars like rentals are getting it.
SiriusXM reports just over 29 million self-pay subscribers PLUS 5.1 million paid promotional subscribers. Their subscriber count is actually over 34 million including the promotional subscribers. (SiriusXM Canada is a separate 2.6 million subscribers.)
Fleets and rentals should be part of the paid subscriber base (although not specified in the quarterly reports, which mentions neither fleet or rental).
We don't eliminate commercial subscribers from DIRECTV and DISH subscriber counts, so I see no reason to dismiss an unknown number of "fleet" subscriptions to SIRIUSXM.
(Both DIRECTV and DISH include commercial accounts in their subscriber counts by converting commercial income to "equivalent" accounts.)
And yet I keep seeing articles online about them merging. Not a fan of mergers, nothing good for us ever seems to come from mergers. I hope it doesn't happen. D* is dysfunctional enough without another merger.
I always have the radio on in the car if I'm alone and I always have MLB Network on. I'm kinda shocked this platform hasn't put "normal" radio out of business. Even with easy access to all the NYC radio stations I find Sirius is just better. Never lack for anything to listen to.
I see and read the articles also Rich. It's all propaganda and maneuvering. ATT is putting all of its efforts into 5g and streaming. Maybe not exactly "Directv Now" but something similar. The logistical difficulties in these two companies merging is astonomical. Satellite positioning, equipment incompatibility, Mobil technician cross training, and the rest of the entertainment provider technology is rapidly morphing towards streaming. DirecTV and Dish see the hand writing on the wall. Not only will they not merge, they will be a memory by 2025.
An actual merger? I agree that would be unlikely for the next few years. But the truth remains that DISH is open to the concept.
I don't see why they could not merge and just keep the equipment, techs, etc. the way it is. Just offer the same programming on each.
2025?? Sorry, but I still don't see sat TV going away any time soon. Just too many rural people without any other options. As I have said before 5G is not a solution for rural people.
There seems to be a long-standing desire on Charlie Ergen's part to purchase DTV and merge it into DISH. After the government rejected the attempted merger of '03, Ergen approached DTV again in 2014 about the possibility, only for AT&T to make the deal soon after. And then again in a quarterly earnings call in Feb. 2018, Ergen mused aloud that, should a DTV/DISH merger be attempted again at that point, the government would probably allow it, given the changed competitive landscape.
OTOH, you have AT&T who has publicly stated that they really were never interested in satellite TV, per se, but bought DTV so that they could gain access to the larger subscriber base and the carriage contracts, with the aim of expanding those contracts to include streaming distribution. Internal leaks have repeatedly painted a picture of a company that wants to shift away from satellite and toward streaming TV.
So you've got one company, DISH, very much under the sway of its founding leader who loves satellite TV and has repeatedly indicated that he wants to be the only sheriff in satellite town. You've got another, AT&T, who seems to see satellite TV as a temporary means to an end.
Why's it so hard to imagine that, as soon as it can feasibly be done, AT&T will somehow consolidate DTV in with DISH, with DISH having majority (if not sole) ownership and control? The tricky part, of course, comes down to money and/or the trading of other assets. AT&T can't be seen to sell off DTV at a loss so soon; that might threaten the CEO's position. But some kind of complicated deal, which involves AT&T getting access to DISH's wireless spectrum, and that relieves some of AT&T's daunting amount of debt, might pass muster with AT&T's stockholders.
[Edit: typo correction, last para]
I really didn't foresee AT&T spinning off DTV until maybe 2022-23 but here's another factor to consider: politics. Which DOJ and FCC would be more amenable to a DTV+DISH deal? The current Republican administration? Or one under a Democratic Pres. Biden? Or (to take things even further) Pres. Warren?
They might decide to make a deal now while the getting is good. And, as I say, AT&T does want to pay down a lot of debt. And I don't think DISH *really* wants to try to come up with $10 billion or more so that they can build out a nationwide 5G network to avoid losing those spectrum licenses. Wouldn't it make more sense to sell the licenses to someone already in the game, like AT&T? (That's surely part of the reason that Ergen has so opposed the T-Mo+Sprint merger; he hopes it will fall through so that T-Mo will come buy some of his spectrum.)
AT&T doesn't get the benefit of all those satellite customers and carriage contracts if they sell off Directv. At least not until they have a lot more streaming subscribers than satellite subscribers, which won't happen for many years.
There isn't any reason for people to want Directv's upcoming IP offering more than they want their satellite offering. The customers who can't have a dish where they live (or just don't want one) are balanced by the customers who don't have good broadband options where they are. The programming cost is the same for either offering, the only savings is in the initial install and not providing a Genie (but since they charge $15/month for that "advanced receiver" it is a profit center for them, and easily pays the cost of a free install)
If AT&T can't keep customers on Directv's satellite product, they aren't going to have any better luck getting customers on their IP product.