There is a trend of company consolidation in the Pay-TV industry set by Comcast moving to acquire Time Warner Cable for $45.2 billion and is now followed by AT&T, which plans to buy DirecTV for $50 billion.
DirecTV is one of the biggest TV providers in the United States with about 20 million pay-TV subscribers, while AT&T only has 5.7 million.
If AT&T accomplishes this deal and overcome the regulatory scrutiny that it will definitely face in Washington, then a consolidated AT&T and DirecTV would make an immense pay-TV operation that would be a worthy competition to the giant Comcast.
If Comcast will get the regulatory approval to buy Time Warner Cable, Comcast will have around 30 million pay-TV subscribers in the US.
Comcast and AT&T would each control almost a third of the marketplace in the country.
The company consolidation trend coincidently happened when pay-TV distributors are very anxious about the business.
The anxiety came from last year’s decrease in US subscribers for fiber optic, satellite, and cable TV providers, which is the first time that it ever happened to this industry. This decrease in subscribers is due to consumers turning to new online services such as Hulu, Amazon Prime, and Netflix. These new online services are cheaper and more convenient. With these competitions, traditional satellite and cable distributors are feeling great pressure in maintaining a competitive price for the consumers.
Acquiring DirecTV would give AT&T an upper hand in negotiating with content providers on programming to gain price advantage against Comcast or other competitors in the industry. This acquisition could also strengthen AT&T presence in Latin America, where DirecTV has already penetrated.
AT&T is taking a lot of risks acquiring a pay-TV company especially that this industry is in constant danger. Giant technology and telecommunications company are constantly vying for control over the online multichannel streaming video platform.