The Hidden Message Behind EchoStar's Potential Marriage To AT&T: U-Verse Sucks And Satellite TV Is Dying
from the gotta-make-the-deals-now dept
We were a little confused last month when EchoStar announced plans to buy SlingMedia. Such a deal made some sense for the investors and founders of Sling, looking to cash out — but at a strategic level it didn’t seem to make much sense. Locking Sling into EchoStar seemed unnecessarily limiting, and the benefits to EchoStar of being the sole owner seemed… not all that compelling. However reports quickly came out about the details behind the plan. Basically, EchoStar CEO Charlie Ergen seems to be realizing that the satellite TV business has gone about as far as it can go, and its opportunities for growth aren’t all that interesting. However, some of the technology behind what the company is doing is quite interesting, and when you combine that technology component with Sling, you potentially get something very interesting. The problem, though, is that you need to shed the whole satellite TV
albatross legacy business. And who better to dump a dying business on than a massive telco who has trouble understanding business trends. Hello… AT&T… step right up. Indeed, the talk is now getting much louder that AT&T plans to buy EchoStar shortly in order to get approval from a friendly DOJ before a change in Presidential administrations could perhaps make it less business friendly. If true, then this sounds like a great deal for Ergen and EchoStar, who ditch the loser part of their business to focus on the growth part.
As for AT&T, initially, I would say that it’s a bad deal, but that might not necessarily be the case due to its own problems elsewhere. AT&T flirted with buying DirecTV in 2003 and EchoStar in 2005. The company did invest in EchoStar, and already offers a bundled package. However, as we pointed out during the original EchoStar rumors, the combination doesn’t seem to make much sense. If AT&T is really pushing for a triple play offering, they should focus on doing that all through a single pipe (as with its U-Verse offering), rather than getting tied up with the limitations of satellite. So why would it make sense? If AT&T’s U-verse plans aren’t going particularly well. In such a case, AT&T could buy EchoStar to get its hands on all of the pay-TV customers and hope that those customers can easily be transferred over to IPTV when AT&T finally figures out how to offer it more broadly. It would be about buying customers, not technology (the good technology would stay with Ergen anyway), squeezing some life out of the legacy satellite business and then casting it off and transferring everyone over to fiber. At least, that’s the only way the plan makes any sense — and it would still require AT&T be able to successfully convert DISH customers to U-Verse, which may not be particularly easy.