Q: What just happened?

DirecTV and Dish, the two largest satellite pay TV providers in the US, settled years of speculation and announced on 30 September 2024 they will merge into one company – creating the largest pay TV operator in the US, at nearly 20m total subscribers. The merger will see DirecTV formally acquire Dish TV and Sling TV from its parent company Echostar in a $1.00 transaction. Investment firm TPG, which will take on AT&T’s current 70% stake in DirecTV for full control, will also supplement the $1.00 fee by providing $2.5bn in financing against an assumption of Dish’s $9.75bn in debt. As a result of the sale, Echostar will refocus its efforts on its mobile telephony brand Boost Mobile, to more aggressively compete with Verizon, AT&T, and T-Mobile in that sector. The ‘DirectDish’ deal is slated to officially close one year from now in Q4 2025, pending regulatory approval.

Q: Why is this important?

Key to the success of this deal will be the cost synergies the pair are able to realise (currently estimated at more than $1bn a year), and the size and scale of the merged company leveraging its reach as a platform for development as a streaming aggregator and vMVPD.

The overall pay TV market in the US has seen steep drops in subscribers the last couple of years as streamers assert their dominance. Pay TV subscribers dropped 10% from Q2 2022 to Q2 2023, and another 11% through Q2 2024 to 53m total pay TV customers. That’s well below Netflix’s industry leading 74m US subscribers; but by a closer comparison, Hulu (including Hulu TV) on its own has over 55m subscribers, with Disney+ not far behind at 51m. Although the ‘DirectDish’ combo of 20m subscribers would be the new undisputed leader of traditional pay TV, that’s still only about half the size of the other major streamers in the US, with Paramount+ and Max both sitting near 42m subscribers. ‘DirectDish’ would, however, be the only pay TV operator with more subscribers than Apple TV+ at 14m subs.

Rather than fighting the streamers, some legacy pay TV players have decided to play nice in an effort to turn things around. So far in 2024, industry leaders Charter and Comcast have attempted the strategy of bundling those same streamers into pay TV packages as a way to slow the subscriber exodus. Charter customers now have access to the ad-tier of nearly every major streamer in the US at no additional charge, having struck the original deal with Disney+ in Q1 and adding Paramount+, Max, AMC+, Vix, and Peacock since then. Comcast subscribers have exclusive access to the StreamSaver bundle, which gives access to Peacock, Netflix, and Apple TV+ at a discounted bundle price.

While these are compelling offers for consumers that face an increasing number of media choices, the new streaming bundle strategy has yet to show conclusive results at helping to slow the loss of pay TV subscribers, with both Charter and Comcast dropping 3% of subscribers each quarter in 2024. Even so, just before the merger with Dish was announced, DirecTV settled its own carriage dispute with Disney midway through September, giving DirecTV customers access to the suite of Disney streamers (Disney+, Hulu, ESPN+, and eventually sports streamer Venu). The streaming bundles may not be showing signs of reversing course for the pay TV operators, but had carriage disputes not been resolved, dwindling selections of cable channels from the operators may have resulted in even greater losses. In bundling Disney streamers with its pay TV service, DirecTV may have bought itself enough time to adapt before things got even worse.

Q: How did we get here?

Both satellite distributors have had what can only be describe as messy histories with their respective parent companies, making this merger seem like pay TV destiny. DirecTV was originally the pay TV arm of AT&T, operating under that umbrella for nearly six years until being spun-off as a separate entity in 2021. During that time, AT&T’s own pay TV service U-verse and the DirecTV Satellite service competed for branding recognition within the larger company, with what now exists as DirecTV Stream having gone through multiple name changes between U-verse TV, AT&T Now, and DirecTV Now. Dish, which saw itself spun-off from Echostar in 2008, existed on its own for nearly 15 years before Echostar decided to fold it back in in 2023 – with Echostar now facing bankruptcy as a result of trying to take on the declining business again.  

There is no guarantee of success for the proposed ‘DirectDish’ company, but as both companies are struggling individually, a consolidation of costs and operational efforts (saving an estimated $1bn a year according to the companies) could help it adapt to digitally forward consumers from the inside out with a focus on building up Sling TV.  With an overall downward trend in the pay TV industry, and two struggling players with complicated parent-company relationships, investment firm TPG saw it as the time to put the two pieces together, potentially renegotiating the future of the US pay TV market in the process. 

Q: What are the wider industry implications?

As traditional pay TV services gasp for breath in the US, the consolidation of satellite services may signal a shifting commitment to virtual multichannel video programming distribution (vMVPD). Both YouTube TV and Hulu TV have seen increases in subscribers year-on-year, with YouTube TV passing 8m total subscribers in Q1 2024 and Hulu TV settling near 4.5m subscribers. Although DirecTV’s virtual service DirecTV Stream has less than 500,000 direct subscribers (not counting those who access via traditional DirecTV Satellite subscription), combining that with Sling TV’s 2m subscribers would solidify it as the 3^rd biggest vMVPD ahead of Fubo.TV, which is currently fighting a legal battle over pending sports streamer Venu as it looks to break the 2m subscriber threshold itself. vMVPD services might be small in comparison to the size of streamers, but the current pay TV landscape begs the question whether further consolidation is on the horizon. A grouping of Fubo, Sling, and DirectTV Stream would create a vMVPD the same size as Hulu TV. Although YouTube and Hulu have the backing of major global media companies (Google and Disney, respectively), the impending ‘DirectDish’ merger and Fubo are independent players looking for ways to stay competitive in choppy media waters. Traditional distribution methods of TV in the US are losing viability quickly, and the future is increasingly digital. The best strategy against the unrelenting streamer swell may just be to lean into the storm.