Amdist all of the more immediate noise and issues surrounding DIRECTV over the past couple of weeks that ultimately culminated in Saturday’s cease-fire in their war with Disney mere minutes ahead of a second consecutive Saturday without COLLEGE FOOTBALL GAMEDAY (more significantly, mere hours ahead of Dana Walden’s personal victory lap not being able to be seen by many of her friends and relatives) came the revelation that that was not the only dispute they were putting in their rearview mirror. At roughly the same hour, REUTERS dropped this story:
AT&T Inc and joint-venture partner TPG Inc are in talks to combine their DirecTV service with Dish, Bloomberg News reported on Friday, citing people familiar with the matter.
The discussions between DirecTV and Dish parent EchoStar Corp are in early stages, people told Bloomberg News, cautioning that an agreement has not yet been reached. “Rumors about a potential transaction involving DirecTV and Dish are nothing new, but we don’t comment on rumors and speculation,” a spokesperson for DirecTV said in an emailed statement to Reuters.
“Nothing new” is an understatement, because the person writing exactly the same e-mail in the exact same words was a colleague and friend going back to the days when Rupert Murdoch and News Corporation had de facto control over DIRECTV and we would eyeroll at how determined the mercurial leader of DISH, Charlie Ergen, was to keep that rumor mill going, even when we knew there was no way whatsoever Murdoch would seriously consider it. But Charlie would personally float those possibilities to trade press and investors to the point that we’d at least have to run some numbers to see if there would be a material impact on the business aside from the obvious elimination of a competitor so as to have our own ducks in a row. What we saw then, and what is true now, is that DISH’s subscriber base was substantially more rural and was factoring in lower ARPU than DIRECTV’s more affluent base was reflecting. If one traveled from suburb to exurb you could literally see the brand name of the rooftop dish changing from one to the other the further you got from a city center.
But if you ever encountered Charlie Ergen personally, you’d likely have expected that to be the case. Ergen emboldens the very definition of an entrepreneur and a maverick. Unlike the corporate and aerospace roots that birthed DIRECTV and its eventual partner USSB, Wikipedia describes a much humbler path to success:
After graduating with an M.B.A. from Wake Forest in 1976, Ergen worked as a financial analyst for Frito-Lay. He “retired” in 1978 in hopes of working for himself.[4][5] Afterward, he was a professional gambler, playing poker and blackjack.[4][6].
In 1980 Ergen, his future wife Candy, and Jim DeFranco started a new business called EchoSphere Corporation, investing $60,000[7] to purchase two C-Band antennas, targeting rural Colorado. They drove around the Denver metro area on a small budget, selling satellite dishes from the back of their truck.[8]
In 1990 Ergen elevated EchoStar’s profile by raising $335 million in junk bonds and purchasing orbital slots for satellites. Two years later, EchoStar got a DBS license from the Federal Communications Commission, giving the company its own geostationary orbital slot. In 1993, EchoStar Communications was incorporated. Under Ergen, EchoStar’s net income doubled to $20.4 million, in 1993. Under Ergen, Dish was the first satellite television provider to offer two-way high-speed internet access as an investor in and dealer for StarBand Communications’ geostationary Ku-band satellite internet access service in the United States and the first to introduce a Digital video recorder in a set-top box. He was also instrumental in making satellite receivers available for under $200.
In many ways, Ergen was (and in many ways still is) to satellite TV what Ted Turner was to cable TV. Ted was front and center doing everything from trying to manage the Atlanta Braves to trying to keep from embarrassing his wife Jane Fonda at conventions by eschewing his meds. Charlie was front and center on his own platform, hosting a weekly “Charlie Chat” and inviting colleagues and negotiators on his show to get their 15 minutes of fame. It was both a badge of honor and a concession to ego that one would become a guest. But next only to perhaps Howard Stern, it was a coveted ask. And very much part of his core strategy–a point driven home in Jack Reid’s NEXT TV piece dropped earlier ths morning:
Shares in Dish Network parent EchoStar climbed 7% in early Monday trading, following reports by Bloomberg that the satellite TV provider is discussing a merger with DirecTV.
It’s not the first time Dish Network-parent EchoStar has entered discussions with DirecTV, with EchoStar chairman Charlie Ergen regularly stating for years that he believes such a tie-up is “inevitable.”
In fact, the FCC blocked a formal proposal to merge the two once in 2002, citing antitrust concerns.
But these are more challenging times than ever, and one longtime expert whom Reid cites spelled it out:
(A)ccording to MoffettNathanson analyst Craig Moffett, the waning market power of these two struggling satellite TV businesses may actually work in their favor this time. Back in July 2021, just before AT&T spun off DirecTV into a separate entity, the pay TV company had 15.412 million remaining subscribers. According to a DirecTV source, that number has fallen to around 11 million. Moffett says that, in light of such unchecked subscriber losses, “it’s hard to imagine that regulators would block a deal.”
Even a maverick who played a lot of cards knows when to fold ’em, and it sure seems like this time he wants to deal himself out. Because while in many ways satellite TV presents navigational superiority at the moment to streaming services and aggregating the two will create an exceptionally formidable footprint, there doesn’t seem to be a lot of optimism that consumers will continue to be so helpless. Heck, even I’m beginning to figure out the issues surrounding our 4K’s caching issues, and once we add some bandwidth all indications are our ability to click and voice-command our way through our 4K-verse will be as worry-free as what we experience with DIRECTV.
And Reid–and Moffett in particular–know what truly is defined as “inevitable” these days:
While DirecTV and Dish could benefit from the merging of their ground facilities and G&A, that single sector likely won’t be enough to keep the business afloat for more than a year.
“It’s hard to argue that a merger shouldn’t happen; it clearly should. Consolidation during a period of secular decline is always to be expected,” wrote Moffett. “But it would be a mistake to overestimate its importance. Adding a year or so to the expected life of satellite TV isn’t going to change the narrative for programmers, distributors, or even for satellite TV.”
So this may have been more than two decades in the making, but at this point 20 million Luddites aren’t all that more valuable than 11 million and it won’t be long before too long more of them get the same level of upgrade and education that my household recently has. Besides, Ergen recently turned 70, and he may just want to enjoy life and let someone else oversee the death march of what he so noisily helped start. In its own way, it’s a sort of revenge as much as an escape. And that, as we know, is a Dish served cold.
Until next time…
