(Bloomberg) -- DirecTV’s proposed takeover of rival Dish is an admission that the satellite-TV business is fading. Chief Executive Officer Bill Morrow has big ideas about what could come next.
Morrow’s plan is to offer viewers a one-stop shop for streaming apps like Hulu and smaller bundles of live TV channels built around specific genres, all delivered, if consumers want it, via the internet. It’s a logical response to the widening loss of pay-TV subscribers.
“That will allow us to get back into a growth situation,” Morrow said Tuesday on Bloomberg TV. “Because we are falling fast.”
Under the deal announced Monday, DirecTV will acquire Dish from EchoStar Corp. for a nominal sum of $1, plus the assumption of about $9.75 billion in debt, creating the largest US pay-TV company. Separately, the private equity firm TPG Inc. agreed to buy out its partner AT&T Inc.’s stake in DirecTV.
The top pay-TV providers in the US lost about 5 million subscribers in 2023, according Leichtman Research Group. Satellite-TV operators like DirecTV and Dish were among the hardest hit, since they don’t also offer internet access, as cable-TV and phone companies do.
There’s a very real financial reason for the shift to streaming, said Bruce Leichtman, principal analyst with Leichtman Research. Satellite customers are expensive to acquire at over $900 each, once installation, equipment and advertising costs are factored in. The price of a new streaming customer is less than one-fifth of that because there are no hardware or installation costs.
“That’s really at the core of why they would prefer to go via internet delivery,” he said. “That’s what they’re advertising: DirecTV with no dish.”
Dish pioneered the online version of a cable-TV bundle with its Sling TV packages. It and DirecTV Stream, a similar online offering, each have about 2 million subscribers. YouTube TV is the leader in the category with almost 8 million subscribers.
Online offerings will be the main growth vehicle, according to Morrow.
“If somebody insists on having Dish and they want the satellite on the roof we’ll still provide that if they want to,” he said. “We’re not gonna try to rush people off the platform.”
Morrow believes the combination of DirecTV and Dish, with about 18 million total subscribers, will give him more clout to negotiate deals with TV programmers like the one he did last month with Walt Disney Co.
Through that agreement, DirecTV will offer streaming services such as Disney+ and Hulu, either bundled with TV subscriptions or on an a la carte basis. The agreement also lets DirecTV put Disney-owned channels in smaller, lower-cost packages for, say, sports fans or families.
The Dish merger, Morrow said, “buys us some time, gives us influence to shape the industry.”
Morrow also sees the opportunity to work with a new generation of broadband providers, like Elon Musk’s Starlink, to market TV programming in rural areas through satellite-based services.
But even a bulked up DirecTV still faces competition with everyone from Amazon.com Inc.’s Prime to No. 1 US cable provider Charter Communications Inc., which are also bundling streaming services.
Morrow promises a TV interface that will make navigating between the services easier, and a search feature to help customers find what they want to watch.
Rival streamers like Netflix Inc. and Warner Bros. Discovery Inc.’s Max “have a narrow scope of content they offer,” he said. “The new company with DirecTV and Dish will actually bundle all these different services together.”
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