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 9, 2012 9:07PM
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Ala-Cart would be a dream. But the provider's would hate it. But I could cut alot of thos junk channel's out right fast, I don't need cartoon's ,or informercail's channel's or home shopping channel's. And alot of the new's channel's since I can watch CNN and my local and have all i need for new's.
Nov 9, 2012 8:17PM
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I kicked DirecTV to the curb in July after 4yrs, too many commercials(infomercials, paid television, etc...), rates kept going up, no upgrade paths for existing customers, but GREAT deals for new customers, crappy customer service, and just an overall feeling of disatisfaction...I doubt very seriously if they are allowed to merge, thery're the only two players in town(satellite)...
Nov 9, 2012 7:46PM
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I firmly believe that both Directv and Dish would be more sucessful if they would take care of their

existing customers better. I have been a subscriber of Directv since 1991 and now pay over $100.00 a month for HD service. I have no Pemium channels or sports packages. I have over 200 channels ,of which, about 100 are pure junk. If I could get cable where I live I would drop them in an instant.

Nov 9, 2012 7:27PM
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I switched from Dish Network to Verizon FIOS 2 years ago. Dish dropped it's
  New York sports package and was  dropping other channels while raising it's monthly bill. When I switched to FIOS, I got the Triple Play & saved approximately  $80.00 per month . The service is much better and I can now watch my NY sports teams.
Nov 9, 2012 7:10PM
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Don't care at all. But if anybody can kick Comcast's rear i'm all for it. They created a monopoly and knocked all the small market cable companies out that actually cared and catered to their local customers. But i'm more than happy with my free over the air HD local channels and saving out on a hundred a month. Being forced to buy nothing but meaningless crap channels with nothing but commercials doesnt appeal at all. And if we can get a reasonable alacarte type option that i could just get my local and maybe 10 or so channels i actually want, maybe i could come around. To be honest though i'm much more happier paying much less for a service like SiriusXM and listening to fantastic radio and channels. I'll take that over cable or dish anytime! Let everyone fight against each other over billions while the customer still is the one who suffers, lol.

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ala cart option is the best idea for customers!!!!  I dont watch but maybe 10 channels out of the 200 plus on cable or when we were DircecTV, which by the way priced themselves out of my budget. I now save 1200.00 per year by switching to cable
Nov 9, 2012 6:39PM
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Why would anyone pay that much (or anything) to watch mostly COMMERCIALS !?!? Just making the 1% richer. Screw  'em  and get Netflix. Great programming and a great price AND---- NO COMMERCIALS!!!!!
Nov 9, 2012 6:21PM
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We had Dish for years and the service was very good however, what started out in the $30 price range ended up in the $90 price range & still climbing. That was just to watch TV nothing else-no phone or internet. We looked at Direct to replace Dish and they where even higher to start! That's crazy anyway you look at it.  Someone's putting a whole lot of money in their wallet and it's not us. We now have HULU for $7.95 and are very happy indeed!  Not to mention if you have a problem with the service they DON'T CHARGE YOU FOR REPAIR! Happy Viewer
Nov 9, 2012 6:04PM
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Who Fig gin cares.  I still watch my Black n White TV and local stations for FREE.  Everyone I know that pay's for TV. have large Monthly Bills,  I don't.  I take that money for my 4 to 5 vacations each year, and spend my Federal Reserve Notes on top end Foods .  It's your money. Besides who in the Hell needs 5,000 channels of NOTHING?  Who is the wisest now?
Nov 9, 2012 6:00PM
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THIS IS ANOTHER case of the content owners trying to control and set prices that are high and even going higher for greed, and being just plain power hungry. I hate to tell them that they drive customers to p2p and direct stream and to buy illegal copies.  Till they change their thinking and its only gonna be when the people get fed up with them will their outdated business plan begin to come into the age of computers for content distrubition that gives people a fair price and fast time to see something and if not p2p will get bigger and more tech savory.

 

We wouldn't even have TV if they could have gotten their way in the early days as they even went to congress to say that the TV was gonna put them out of business, also when the recordable type like the cassette and the vhs and so forth, each time they have cried we are gonna be ruined, well they still are in business and making billions and paying out millions to judges around the world and so many millions to our politicans in bribes oops i mean funds for reelection lol.

 

time for them to change because from what i can read and see this is like rock and roll, or pot its here to stay either with control and taxes or just plain out against the law and under the table actions like now.

 

it makes more sense to join the wagon and be the leading wagon even if at lower prices but you are still making millions instead of spending millions fighting it.

 

 

Nov 9, 2012 5:56PM
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I love the Hopper commercials but would never have Dish - they drop/add channels or block out of spite; had Directv for almost 20 years until they messed up my move order last year.  As much as I did not want Comcast, I signed up with them when Directv messed up and I have to admit that I have been happy with them, so far.

Nov 9, 2012 5:45PM
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Hmmmm...well if it really ment better service and lower costs, ok. The shorter shows and increasing commercials aside (I record and skip all commercials anyways, like most people with DVR's, the networks are just living in denial, didn't watch them before I had a DVR, would always channel skip) I really wish they would go to an ala cart option. Pay for what I want and drop the other crap. I guarantee some of these channels would be gone and that in turn should free up some resources for the networks as well as boosting revene potential for the networks people always watch and would likely help subscriptions if the people weren't paying for all the other crap. Out of the channels I have on my tv package I only watch maybe 20% of them and of that only half of them or less on a regular basis, and that includes the local channels during the season when shows are new.

I think its time

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