- DirecTV and Dish have decided to team up in the face of steady subscriber losses.
- DirecTV hopes the deal can make it a one-stop shop in a fragmented media landscape.
- But there’s another clear aim for DirecTV: getting more leverage over content providers.
DirecTV knows it needs leverage to survive in a cutthroat TV industry marred by cord-cutting, so it’s joining forces with one of its biggest rivals.
Two decades of flirting between DirecTV and Dish Network culminated in a long-rumored deal unveiled on Monday. DirecTV will absorb $9.8 billion worth of Dish’s debt, and private-equity firm TPG will own all of the satellite-TV giant after buying AT&T’s stake in a separate move.
The timing of this tie-up between the two major satellite-TV providers is no coincidence.
DirecTV is fresh off a hostile carriage dispute with Disney in which its customers went without channels like ESPN and ABC for nearly two weeks at the start of football season, which is a huge driver of pay-TV sign-ups. The companies eventually reached a truce in which each seemed to secure concessions, though it won’t be clear who won until details are finalized.
Like all pay-TV providers, DirecTV has been crushed by cord-cutting for the last decade or more. The satellite titan hopes to stem the tide by offering skinnier, genre-based bundles and streaming services at no extra cost, though industry observers doubt those moves can reverse declines.
But unlike Charter and Comcast, which have broadband businesses they can fall back on, DirecTV has no clear backup plan outside the pay-TV bundle.
With this in mind, media companies may try to push around DirecTV. That’s one reason the TV provider negotiated so aggressively with Disney and even went on offense by teaming up with rival Dish. The move might not be a home run, but it could help DirecTV at least avoid a strikeout.
“I don’t know that it’s a game-changer,” Corey Martin, chair of entertainment law firm Granderson Des Rochers’s Entertainment Finance Practice, said of the deal in an interview with BI. “I think it allows them to continue to have a seat at the table for the foreseeable future.”
DirecTV may need to fight to survive
DirecTV has a survival plan: It wants to become the ultimate middleman between content providers and consumers. It hopes to endure by putting traditional TV channels and streaming services in one place and establishing itself as the central interface, similar, in some respects, to how Spotify pools together music from major labels. It’s also similar to the pitch made by TV operating system heavyweights like Roku and Amazon.
“We need some aggregator in the space who can bring all of your content together that you actually want to watch, not based on the studio that creates it,” Jon Greer, the head of communications for DirecTV, told Business Insider.
While streaming has given consumers tons of entertainment options, it has also created headaches. There’s so much content that it can be tough to find quality shows and movies, and the fragmented landscape can be difficult to navigate. Sports fans have it particularly hard, especially since the launch of sports streaming service Venu was blocked in late August.
DirecTV CEO Bill Morrow said to investors and analysts in a webinar on Monday that while customers love watching shows on demand and on the platform of their choice, “they are pained with the idea of how the pricing works, how to account-manage across multiple subscriptions, about where to find their content and navigate each individual portal differently.”
These issues, plus streamers’ steadily rising prices, have helped bundles mount a comeback. And early evidence suggests that offerings, like the Max-Hulu-Disney+ bundle, are popular.
DirecTV’s fantasy is that consumers get fed up with paying for a litany of services and turn to them for a one-stop solution.
Implicit in the satellite provider’s strategy is the assumption that media companies need their help to build highly profitable direct-to-consumer businesses.
“This will again allow us to work with the programmers in a way that isn’t so much about bullying,” Morrow said. “This is about collaboration.”
But there’s a space between bullying and collaboration, which is where the relationship between TV distributors and programmers usually stands. In that context, DirecTV’s tie-up with Dish could give it the leverage it needs to try to turn its future vision into reality.
“The programmer relationship is pretty lopsided where they have some, they know their market power, they exercise their market power,” Greer said. “We never want to do that, but we need to be able to have the scale to be able to have these different conversations with programmers.”
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