Bad news for folks that want to ditch cable TV bundles. Image: Poster Boy/Flickr
The average TV watcher in America pays for 189 channels and only watches 17 of them. But as consumers dream of being allowed to buy the content they want a-la-carte, instead of getting force-fed bundles of terrible filler channels, the telecom industry is moving in the complete opposite direction.
Just weeks after Comcast and Time Warner Cable announced their planned merger, AT&T has made a long-anticipated bid to acquire satellite television provider DirecTV for $48.5 billion ($67.1 billion with debt).
In both cases, internet and cable providers are banding together in a someone desperate effort to stem the tide as TV viewing habits shift away from the tube and onto the web. But the telecom consolidation don't bode well at all for consumers hoping to cherry-pick their favorite content and internet services. In fact, it will probably encourage telecom packages bundled even tighter together.
With DirecTV on board, AT&T could add a beefed up video offering to its broadband internet and cell phone package. And like competitors Verizon, Comcast, and Time Warner Cable already do, it'll most likely offer incentives for customers to buy all three services together.
That could take the form of price breaks or special promotions pushing the all-in-one package. Plus, unlike Comcast or Time Warner, the phone company could offer users the ability to view content across multiple platforms. Want to watch movies and shows on your 4G smartphone? No problem, as long as you've got the AT&T “dish and data” plan. (Yeah I made that name up.)
"This is a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens— mobile devices, TVs, laptops, cars and even airplanes," AT&T exec Randall Stephenson said in yesterday’s announcement.
Thing is, if it's more expensive for a consumer to get their internet from one company and cable package from another, this concentrates power in the hands of a shrinking few media conglomerates, lowering competition and hiking up prices.
And a-la-carte TV? Well, the hope was that the cord-cutting trend would force cable companies’ hand into breaking up their bundle packages. But instead, telecom giants are responding to the threat of Silicon Valley streaming services (Netflix and YouTube) by bonding together to offer their own video services.
You're already getting your internet from AT&T, and if it's bundled with AT&T's version of Netflix-esque streaming video, that might just stop you from cutting the cord.
“Like skid row junkies in the final wretched tremens of downward spiral, telecom/cable/satellite investors now appear to need a deal fix almost daily to stave off the messy crisis of incontinence that comes with the inevitable withdrawal,” Moffett-Nathanson analyst Craig Moffett summed it up nicely. “Never mind the fundamentals… just spin the bottle. Today’s deal is AT&T and DirecTV.”
While AT&T already offers video through U-Verse, it's not a very substantial chunk of the market—5.7 million subscribers versus DirecTV's 20 million. The real meat of the $48.5 billion dish purchase is that the phone company will get the DirecTV’s programming deals with content networks like ESPN and HBO.
That gives the company options: It could launch its own version of Netflix, or beef up its on-demand TV service to include the new top-notch programming, served up over AT&T broadband internet.
It’ll also make it easier for the DirecTV to strike continued deals with networks, since the deal would expand how many households it’s reaching.
As of now, both companies are struggling, taking a hit from competitors that can offer both TV and internet on one side and online video services on the other. The merger would be a lifeline; the combined company could actually compete against the Comcast-TWC behemoth. AT&T wrote that the deal would offer a "stronger competitive alternative to cable."
So, it's smart from a business perspective, or at least offers some hope for the future. But it’s terrible for consumers. Already the deal has drawn the ire of consumer advocates, as the Comcast bid did, and could have a hard time getting approval from government regulators worried about anticompetitive practices and net neutrality. (AT&T pledged its commitment to the latter in the announcement.)
Unfortunately, what’s best for consumers isn’t what drives the marketplace. If it was, we’d have had a-la-carte TV a long time ago.