Could Dish Network and DirecTV merge?

Shrinking subscriber numbers and rising costs have both companies considering a deal.

By Jason Notte Nov 9, 2012 4:29PM

Image: Watching television (Maria Teijeiro/Getty Images/Getty Images)Dish Network (DISH) and DirecTV (DTV) are getting pounded by content providers' demands. Would teaming up help them fight back?


Dish chairman Charlie Ergen certainly thought so on Tuesday, when he told everybody sitting in on his company's earnings call that the two largest U.S. satellite-TV providers "have to consider" a deal. DirecTV CEO Mike White agreed with that assessment as recently as September, when noted the "challenging content cost environment where consolidation could be pro-consumer."


He admits there haven't been any talks about such a move between the two companies yet -- and federal regulators declared the merger anticompetitive the last time it was proposed in 2002 -- but consumers don't have to hit the guide button to see what's going on with Dish and DirecTV.


Analysts estimate that Dish's profits will grow by less than 8% through 2014. That's about 95% less growth than other cable and satellite-TV companies. DirecTV, meanwhile, posted its first-ever quarterly net loss in customers this year. Dish has reported a drop in four of the last six quarters, including a net loss of 19,000 in the most recent quarter. That's still better than the 111,000 customers it lost a year earlier, but the cost of getting new customers also climbed 15% to $453 million during that span.


There are a couple of issues crossing DirecTV and Dish's signals. AT&T's (T) U-verse and Verizon's (VZ) Fios are gaining customers and bundling their cheaper-than-cable offerings with Internet service. Meanwhile, Netflix (NFLX) and Hulu offer streaming video for only $8 a month, while. Amazon (AMZN) is testing that monthly price for its Amazon Prime streaming service that also throws in two-day shipping for items in Amazon's marketplace. Both Amazon and Netflix also offer their content commercial-free, which is becoming a sore point for the satellite providers.


Dish bumped up ad spending this year to promote its Hopper set-top box, which record all the major networks' prime-time shows, store them for eight days after their initial broadcast and allow customers to skip all commercials without fast-forwarding through them by pressing the AutoHop button. DirecTV boosted its own spending to compete, but angry content providers just piled on extra costs.


Fox Broadcasting (NWS), Comcast's (CMCSA) NBC Universal and CBS (CBS) each sued Dish, claiming the AutoHopper service will destroy the "advertising supported ecosystem" that provides free, over-the-air prime-time TV. They also assert that the copies of the shows that Dish's hopper creates constitute copyright infringement. Dish sued the networks in New York, essentially arguing that the copyright claim is bogus.


According to Ad Age, a U.S. district court judge in Los Angeles agreed that Dish's service infringed on copyright, but refused to block it. It's just the latest content-provider headache for Dish, which just ended a nasty negotiation with AMC Networks (AMCX) last month. Dish ended up paying a $700 million settlement after taking AMC, IFC, the Sundance Channel and We TV off the air for three months as part of a dispute with AMC's former parent company Cablevision (CVC) dating back to 2008.


DirecTV, meanwhile, yanked MTV, Comedy Central, Nickelodeon and other networks out of its lineup in July during a dispute with Viacom (VIA.B). That dispute was resolved before August, with the Viacom networks returning to air and DirecTV paying 20% more for the privilege of airing them.


The common belief is that the two satellite providers' combined 34 million U.S. subscribers would give them a bit more leverage against the content providers. If only that were so. Netflix just passed 30 million global subscribers for its streaming service, but watched content costs jump from $3.5 billion to $6 billion withing a year.


A Dish/DirecTV combo would need to offer something extra, with some help from the Federal Communications Commission. Regulators are getting ready to decide whether Dish can use its wireless spectrum to transmit mobile voice and data by the end of 2012. That would effectively put DirecTV-Dish on par with Verizon and AT&T services by giving them fast wireless internet connections to go along with their TV offerings. It would also help the satellite providers' argument for a merger by turning Verizon and AT&T into the direct competition.


The satellite providers and their customers have seen the enemy, and it's not the other company with the funny gray dish.


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42Comments
Nov 11, 2012 3:37AM
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What ever You do stay away from comcast #1 in worst customer service.
Nov 11, 2012 1:42AM
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The content makers, owners and distributors are huge Obama voters.   Nothing will stop the price increases from coming at you, certainly not Obama & Co.
Nov 10, 2012 9:41PM
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   When I returned my inflationary DISH equipment to the company,I asked the mailman if many people were returning the same equipment ? He said he was picking up a HUNDRED  a day. 
Nov 10, 2012 9:38PM
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They may as well. They are pretty much a mirror image of each other. Same price,same channel

packages.We have gone back and forth with them for over 15 years.After the first few months of

free programing you are right back to being dissatisfied. I think they are allready married because

there is no compitition.They have a lock on the dish market and they get away with it.

Nov 10, 2012 9:34PM
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Free tv rules! Radioshack antenna for 100 bucks umpteen channels. No bills to pay:-)
Nov 10, 2012 8:50PM
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Iam a new customer to direct tv .The customer service sucks,The price they quoted me and charge are never the same.They say it will be fixed buts its not.Were supposed to get 3months of free premium channels but were getting charge for that also. Stay away from direct tv!!!
Nov 10, 2012 7:51PM
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I think that it would be wiser for Direct TV buy out Dish TV. It would get rid of it's biggest competitor and the only thing they would have to do is explain why DTV  is better than cable. That shouldn't be that hard ... there is no comparison. The added revenue would allow Direct TV to do some things that would distance themselves from cable and probably send them to an early grave.
Nov 10, 2012 5:56PM
Nov 10, 2012 2:32PM
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Had Dish for a number of years. Every time there was a storm within 20 miles I lost service.
Nov 10, 2012 2:20PM
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Nielsen ratings are good in one way , i use to rate the shows on there. the  only problem i had with them was , when someone stopped over your house they had to press a number when they watched a show ,so they knew what you were watching. and if you watched it with your company ,you were rating it as well. out side of that ,they were on the money with 80% of what was hot on tv.
Nov 10, 2012 2:12PM
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i have a bundle with verizon i thought i was getting fios, but they gave me there phone service computer, service ,and it is slow, on a modem . and the have partnered with direct tv. because they don't have fio,s in my area yet ,they told me they would have it in my area in 6 months , its now over a year and i still dont have it. also there computer service on here sucks, for the money i pay , i can get out of Verizon  contract but i sill have to stay with direct tv for 2 years , what a mess . the left don't know what the right is doing,and i have to call them every month to get the bill fixed because the over charge me every month .i hope i don't have to call them this month or I'm getting a lawyer
Nov 10, 2012 1:59PM
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they should go back to free tv , it was better ,the stations never wentout and you did not get all these info, bull.......
Nov 10, 2012 12:58PM
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I am anxious to switch from Comcast because of outrageous constantly rising fees. I would sign up for Dish or Direct if I could find a dealer who would promise my second-year fee would not quadruple. If consumers could select content cafeteria-style, prices for content would go down. I fear the entire industry greed and lobbyist ownership of key members of Congress will prevent reasonable pricing.
Nov 10, 2012 11:53AM
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Many years ago I started my TV satellite viewing with Primestar, I had 7 channels. I went from DirecTV, which I hated, to Dish. I eventually had the "everything" pack which at that time was $100 a month which equaled nothing to watch. In 2008 I quit TV service. Premium channels were showing nothing that really interested me for the money I was paying and the majority of other channels I never watched. In order to get the channels I did watch like Discovery, History and a few more I had to go to the pack under the "everything" and still had most nothing so I stopped it all.

What also started bothering me was the way regular stations were acting, CBS, FOX etc. You're watching a weekly series, you watch a few weeks then it's off for a few weeks, comes back for 2 weeks goes away for 3! A few times the time and day were changed and if you happened to miss the latest episode that told you, you were lost because you figured it was just not on that week!

I feel the Neilsen ratings are a joke, a whole lot of very dumb people must be watching the list of stupid crap on air, Jersey Shore? Many good shows stopped in mid-season or never got renewed, but I see the stupidity still airs :(

Keep in mind I was a TV junkie. At one time I had to write a list of what I watched and when and stick it near the TV so I didn't miss the 23 weekly programs I was watching.   Sounds like a lot and it was but when you consider the hundreds of shows on it's not. I gave it all up.

I now have Netflix and Hulu. I wait for series to be released and watch them after everyone else has. Hulu is free and with Netflix I have streaming movies and DVD's delivered for my monthly dollars. I save Hundreds of dollars a year this way and watch what I want not what they think I want. Ala cart would be the best option but I don't see that happening.
Nov 10, 2012 7:47AM
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Cable TV has out priced our family, canceled it several months ago..

Got tried of them offering new customers lower rates than they charge me...

Also was tired of the paid commercials, re-runs of programs, and loud volume

 increase during the commercials..

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The content owners are a super class impervious to market forces and backed by congressional support given to agencies they will not be reigned in.  Game over.
Nov 9, 2012 11:43PM
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I have Dish and it's fine, but only because they must compete against Direct TV.  A merger would end any real competition between the two and if they can't make enough money, they better change management not reduce the consumer's options.  As far as cable is concerned, they seemed happy to take the left-overs and with what they don't have to offer, you've got to be a slow cipheror or still believe you're saving money getting HD free, if you know what that is.  
Nov 9, 2012 10:15PM
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Yup Sunday morning program about 80 channels of Junk out of 110.. I drop them like a rock sinking in the ocean...They S*ck big time..
Nov 9, 2012 9:58PM
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I have not had cable or sat for over 4 yrs now ! I have a hi def ant on a tower getting free TV ! When i had sat i had 120 channels and out of that i only watched 12 -14 channels ! Then i noticed that i was paying a house paymt a yr to watch TV ? I said screw this ! So i tell them when they call me to sign up for sat or cable , let me pick the 12-14 channels i want and let me pay for that ? They say we cannot do that so i say goodbye.. And my FREE TV i get 36 channels and i do just fine.. I have my NFL on fox , cbs, nbc .. I truly need nothing else !
Nov 9, 2012 9:40PM
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i have had dish for many  manyyears, almost form the day they  went  into bussiness, i  hate direct tv. it sucks, however if htey merge? i wil have to drop dish,  i want nothing ot do with direct tv, been burnt by them once before, and iw ont get burnt twice, ihave dish in 3 of my homes and i pay for them  year  round, when igo to the one it is always working,  but direct? never works, nieghbours have direct and  there is always somethign wrong with it,

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