With a media landscape newly awash with rampant rumors about mergers and acquisitions, ostensibly to “save the industry”, at least one that was on track to reality is now apparently back to square one. Per THE VERGE’s Emma Roth:
DirecTV has dropped its plans to acquire Dish, the company announced Thursday. The deal would’ve created a TV service megamerger, but it fell through after Dish bondholders rejected the takeover.
In September, DirecTV reached an agreement to acquire Dish, Sling TV, and EchoStar’s TV business for just one dollar, while also taking on Dish’s $9.75 billion in debt. However, Dish bondholders — or the investors who lend money to a company (and expect to be paid back) — weren’t happy about the decision, as the transaction would’ve cut the value of their holdings by $1.5 billion.
“While we believed a combination of DIRECTV and DISH would have benefitted all stakeholders, we have terminated the transaction because the proposed Exchange Terms were necessary to protect DIRECTV’s balance sheet and our operational flexibility,” DirecTV CEO Bill Morrow said in the press release.
But as VARIETY’s Todd Spengler noted in his coverage that also dropped yesterday, it’s clear Morrow’s counterpart is looking at the world through a much different set of prescription lenses:
“DirecTV notified us that they will terminate the purchase agreement to acquire the Dish video business at 11:59 p.m. ET on November 22,” EchoStar spokesperson Ted Wietecha said in an emailed statement. “We respect their decision and will continue to deliver the excellent customer experience our pay-TV brands are known for. As mentioned on our recent earnings call, we have a more robust foundation to operate and grow EchoStar’s business, independent of this agreement.” Wietecha added that last week EchoStar repaid its November debt maturity with funds received in September and also received an additional $5.6 billion through spectrum secured notes and equity issuances.
As we mused barely two months ago when we first were getting rumblings of this shotgun wedding, DISH has more than its share of existential problems. Aside from being second in a clearly declining class in terms of subscriptions, currently at roughly 8 million U.S. TV HHs disproportionately concentrated among more rural and lower SES communities, it has issues with leadership and underwhelming results with the business innovations they have previously attempted. While they offer somewhat lower price points than does DIRECTV for their offerings, they frequently tend to be clunkier and more problematic. So it’s not just their investors that are disappointed by what has transpired this week.
But this does leave an open question to ponder as we settle into a holiday mode. What’s next?
Because, as THE ANKLER’s resident Jersey Shore genius Sean McNulty reminded yesterday:
Even the usually very hot take-heavy media journalism industrial complex seemed to have zero takes in the coverage of this deal breakup so far as to what this means for DISH going forward…DISH is America’s 4th or 5th largest TV bundle provider (YOUTUBE TV’s numbers are private and only updated periodically in a public fashion)…The future of a company that provides a TV bundle to nearly 8M folks is seriously in question, with few to zero clear options ahead.
But the snarky quip that McNulty ended his morning rant with certainly kindled an idea in my head:
Anyone have SpinCo’s number? 🙋♂️
Think about it. As was noted in our musing just Wednesday, (t)he yet-to-be-named SpinCo will house most of NBCUniversal’s cable television networks… (t)hose networks collectively generated approximately $7 billion in revenue over the past 12 months, Comcast said in its announcement.
And do remember a big reason why those networks were capable of earning that sort of cache, and much more in recent years, was directly because they were aligned with a company that gave them premium positioning and priority promotions as a result of this family connection. And Comcast benefits from having leverage over its competitors by being able to control access to their subscribers, which per WALL STREET ZEN stood at 14.11 million video households and 32.253 million internet households as of the end of 2023. Adding another 8 million to the mix, with a national footprint that actually compliments the large market and urban concentrations of markets like Chicago, Philadelphia and the Bay Area would only give Comcast an even stronger negotiating position.
And if DIRECTV can aggressively roll out a subscription package of FAST channels to tackle the cord-cutter and cord-never issues as well as offering their providers more ways to, as Ted Turner used to eloquently say, “use up all of the parts of the chicken, including the chicken sh-t”, it’s certainly possible for even more brand extensions and subsets to be created out of those networks when both content and distribution are under control. An entire channel of “Blue Sky TV” reruns or the legacy of FASHION POLICE might not be automatic ratings gold, but they are certainly cost-effective and bound to be popular with the beancounters who will be scrutinizing whatever SpinCo (or whatever it’s called) does, and it can provide provide a few incremental shekels to cover the cost.
Take some of that $7 billion annual revenue and throw in a little more to make those bitchy DISH investors less unhappy, and in the immortal words of GREEN ACRES’ Mr. Haney, “You got yourself a DEE-AHHL!!”
And I suspect whoever has succeeded our friend Haney in that region of the country could advise those Philadelphia lawyers how best to keep as many of those DISH customers in tow.
The alternative, of course, is potentially to let DISH die, leave those 8 million folks high and dry, and fight over their carcasses. Both DIRECTV and Comcast would have oars in that water. But leaving that option up to people who are both experientially and generationally less likely to find their ways into old school camps before they actually have a chance to experience it themselves is a huge risk, and one where trend lines don’t point in a favorable direction.
No, it’s not a perfect solution. But what do you have in YOUR kitchen that might look better on these dishes?
Until next time…