After years of whispers, direct statements and white papers 2023 should be the year it happens. What? A merger between Dish Network and DirecTV. Both services launched in the shadow of the cable business as an alternative, and in some cases where cable lines were not accessible, a necessity. When DirecTV launched the NFL Sunday Ticket in the face of cable dominance it shook up the sports world and changed the way people could approach national and regional sports broadcasts. Dish Network sans the football package also worked to offer competitive rates on the big bundle. And at the time it was seen as a different kind of product. As the landscape of TV has changed the satellite TV industry which at this point really is just Dish and DirecTV are just seen with cable as “Pay TV”/Cable. In a sort of repeat of history, both Dish and DirecTV were also early pioneers in the Virtual MVPD world, which is the industry’s way of describing the cable replacement packages like Sling TV, DirecTV Stream, Hulu with live TV, and others.
Dish was first on the scene with Sling TV in February 2015 while DirecTV parent company AT&T followed Dish (and Sony whose own service PlayStation Vue was later shuttered) in November 2016. The move seemed to be both a leap into a new market and a measure to offer a replacement (for their by-then-aging) satellite networks. The two coexisted with cable providers for years but an overall drop in subscribers within the pay-TV industry and a notable 11% decline yearly in the satellite market alone points to the need for action by one company or the other. And DirecTV looks like the one more likely to get scooped up. For one, the company is privately held. So there are no shareholders to deal with as far as merger agreements. And on top of that, the company has been in cost-cutting mode recently laying off roughly 10% of its upper ranks just this week. It would be presumptuous at this point to say if it is ever going to happen it would be now but chances seem stronger now than ever.
As far back as August 2021, Dish Network Chairman Charlie Ergen repeatedly stated that a DirecTV-Dish merger—whether it’s this year or in 10 years—is “inevitable.” He reiterated that stance earlier this month, saying a merger is more of a “timing issue” than anything else. later in early 2022 Lightshed analyst Rich Greenfield told Fierce Media “We believe the regulatory risks today are not high given the state of the Pay TV market. Frankly, if [Dish Network Chairman Charlie] Ergen can’t get it announced this year, it might never happen,” He further mentioned that DTV could suffer more losses if (as happened) the company lost NFL Sunday Ticket.
In the third quarter of 2022, Dish Network had 7.6 million pay-TV subscribers including 2.41 million Sling TV subscribers. DirecTV and AT&T’s entire former TV operation counts around 13 million subscribers. These include the satellite business, its streaming product, (now called DirecTV Stream), and the few remaining U-Verse customers. This means that if a merger takes place the new company would have over 20 million customers. How profitable the satellite side of the business would be is debatable. We believe that Dish would work to convert customers instead to Sling TV and create a behemoth service that would dwarf all of the rest of the VMVPDs combined. Whether they could hold on to all of those customers is another thing. A key point may be the ability to offer local broadcast channels through a new combined service. Dish Network through Sling offered a less expensive streaming package than most competitors partially by eschewing broadcast fees and encouraging customers to use antennas to receive over-the-air signals.
Is DirecTV in a cost-cutting mode in order to prepare for a sale? Can Sling TV become the largest streaming provider in the industry? If Dish were to make the move, would it then push for satellite rights to the NFL? If the company makes an aggressive move it could really shake up the industry. We will be keeping a close eye on this going forward.
