In a conference call to discuss quarterly earnings yesterday, DirecTV CEO Mike White had some cautionary words about the pending marriage of Comcast and TWC.
“If the deal is approved as proposed, it clearly represents an unprecedented media concentration in one company,” explained White.
How exactly would that unprecedented concentration affect the satellite TV business?
CONTENT ACQUISITION
A combined Comcast/TWC would result in the largest subscriber base of any TV provider, giving the merged business the most leverage when it comes time to make deals with the networks and other content providers.
“A merged Comcast/TWC, with a large and growing cost advantage in content acquisition, will only make things harder” for DirecTV and Dish, industry analyst Craig Moffett said after yesterday’s remarks from White.
BUNDLED UP
While satellite subscribers can get Internet service through DirecTV and Dish, that service is ultimately coming from a third party; usually a satellite-based ISP or DSL service through local phone companies.
Thus, satellite customers often get their broadband connection through whichever terrestrial cable company services their areas. They also tend to pay more each month for their Internet than their neighbors who get both TV and Internet from the Comcasts and Time Warner Cables of the world.
As cord-cutting continues to proliferate, it only makes sense that cable operators will make an even bigger push to sell customers on TV/Internet bundles that keep them from fleeing.
Price hikes for Internet-only customers seem inevitable as doing so would help offset the revenue lost by cord-cutters. And with the lack of competition in the ISP marketplace, satellite customers may have no option but to pay more — or ditch the dish and switch to cable.
PRESSURE FOR FURTHER CONSOLIDATION
White said on Thursday that the Comcast/TWC deal “certainly creates some significant changes in the competitive landscape that we need to think hard about,” adding that DirecTV “will continue to look at options for how we could strengthen our company for the long term.”
Long before there was any talk of a Comcast/TWC merger, there were concerns about how Dish and DirecTV would ultimately fare in a world that is quickly transitioning away from traditional TV-viewing habits.
Yes, both Dish and DirecTV have substantial online content offerings, but they are not the one actually delivering that content to the end-user. As mentioned above, this content is coming through third-party ISPs. What will be the point of running a satellite TV service when we reach the point where most subscribers get their content online?
That’s why there is renewed chatter about the need/possibility of a merger between DirecTV and Dish, with some saying such a deal is necessary for the long-term survival of satellite TV.
The odds of such a merger being approved are lower than those facing the Comcast proposal, as it would leave only one major satellite provider in the U.S. and create a subscriber base that is many times larger than that of most large cable operators.
Dish is already a potential suitor for acquiring T-Mobile USA from Deutsche Telekom. It’s the kind of arrangement that could help both companies — or potentially sink them if mishandled.
WHAT’S NEXT?
Comcast plans to file its merger documents with the appropriate federal regulators by late March, kicking off antitrust and competition reviews by both the Justice Dept. and the FCC.
Stakeholders like DirecTV and Dish will certainly have their say during that process and Comcast will undoubtedly tweak its offer in ways designed to quell those concerns. The question is whether those concessions will be enough to allow the merger to be finalized.
DirecTV CEO Voices Opposition to Comcast-TWC Deal [WSJ.com]
DirecTV Urges Feds to Scrutinize Comcast-Time Warner Deal [TheStreet]
Comcast filings with regulators expected at end of March [Reuters]
by Chris Morran via Consumerist
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