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Entertainment

DIRECTV Acquires DISH Network in Strategic Alliance

DIRECTV just announced an agreement to purchase DISH Network’s satellite TV business, including DISH-owned streaming service Sling TV, through a debt exchange transaction of $1. As part of this deal, DIRECTV will also acquire DISH Network’s debt of $9.75 billion, pending regulatory approval. The agreement, if approved, will combine the two most popular satellite television companies in the United States into the largest in the country.

The entertainment industry saw a significant overhaul start to take place once streaming emerged around two decades ago, but the major shift began around 2017. According to Parks Associates research, almost 70% of households subscribed to a traditional pay-TV service and at least one OTT service in 2017. Today, 88% of households subscribe to at least one OTT service, and only about 43% of households subscribe to a traditional pay-TV service; DIRECTV accounts for about 17% of these traditional pay-TV subscribers and DISH accounts for about 5%.

Both DIRECTV and DISH have been challenged by the overall decline in legacy pay-TV but have adapted to market changes by offering streaming pay-TV services such as DIRECTV Stream and DISH Anywhere and DISH’s Sling TV service. DIRECTV asserts the merger will ultimately result in more choices and better value for the consumer – and many do still find value in the pay-TV model. Consumers continue to appreciate the familiar user experience, ease of access to live news and sports, and overall, less pressure involved when choosing something to watch. This is evidenced by Parks Associates’ data on virtual multichannel video programming distributor (vMVPD) service adoption that finds about one in five households now subscribe to YouTube TV, Fubo, Sling TV, and the like.

While a sizeable proportion of households still value the traditional pay-TV model, pay-TV providers have been hard at work to develop strategies that keep customers paying for at least some level of service – such as offering smaller channel packages.

Disney and DIRECTV recently resolved a difficult two-week blackout that left millions of DIRECTV customers without access to key Disney-owned channels, including ESPN and ABC. After negotiations, the companies reached a deal that allows DIRECTV to offer genre-specific channel bundles, a significant shift from traditional packages that tend to have more channels than most people use, and even want.

The new deal’s emphasis on smaller bundles, instead of large (and expensive) traditional packages, could set a new standard for future negotiations across the industry. DIRECTV’s ability to negotiate smaller, genre-specific bundles shows that this shift is gaining momentum and could lead to bigger changes in how TV content is packaged and sold.

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