Prepaid Satellite TV Services M&As
Based on very thorough historical research into the US satellite TV market, we have concluded that the two major players, DirecTV and Dish Network, have been overwhelmingly dominant for the last two decades without any serious competition to challenge them. Neither company has historically offered a prepaid model, instead requiring 2-year contracts. Indeed, the only prepaid satellite TV company that we could find in the US is Orby TV, which has existed for less than a year. Below is a description of our research strategy and our findings, which include perspectives on why the satellite TV market is moving outside of the US, why a prepaid model may have been considered but not yet implemented by any US company before Orby, and historical notes on the key players in the US.
Note: Due to the specific criteria of this request, we have not limited ourselves to sources published in the last two years per our standard operating procedure.
Research Strategy and Useful Findings
Following from the feedback to our previous report that there is at least one prepaid satellite TV company, Orby TV, in addition to the two major satellite TV players, DirecTV and Dish, we looked into Orby's history and relationship with the two giants to better frame our ongoing research.
- Orby TV is a very new player in the market, having launched in early 2019 and started service in July.
- Likely because the company is very new and too small to launch its own satellites, it is heavily dependent on accessing Eutelsat's satellite system via a multi-year agreement that was announced in September 2019.
- In its first year, Orby's revenue is estimated at only $2 million, a pittance compared to its competition.
- DirecTV and Dish are generally regarded as the only two players of note in America, including by authorities such as Consumers Advocate. Some other historical details of note (which we include as framing for our conclusion above):
- Notably, DirecTV and Dish require two-year contracts, disqualifying them as prepaid satellite TV services.
- Even as early as 2002, DirecTV and Dish (originally owned by Hughes Electronics and EchoStar Communications, respectively) were considered to be so dominant that a proposed merger was blocked by the US Justice Department.
- However, DirecTV and AT&T merged in a $48.5 billion deal in 2015, with the Justice Department approving the deal after its review "found no significant risks to competition."
- However, despite years of interference from the Justice Department, Dish Chairman Charlie Ergen stated in February 2020 that a merger between Dish and DirecTV is "probably inevitable" due to the financial troubles faced by the latter.
- Significantly, in explaining why the Justice Department might not block the merger this time around, Ergen did not cite any competition from smaller satellite TV players, let alone prepaid players like Orby, but because of the competitive advantage of non-satellite players in the entertainment industry: "You can't swim upstream against a real tide of the over-the-top, big players" like Netflix, which have drawn away subscribers from Dish's streaming service, Sling TV.
We next dug backward through news and technology media articles, searching for references to prepaid satellite TV companies in the US. Our thought was that if we could identify smaller prepaid companies by name, we could follow their histories forward to determine whether they had gone under or had been acquired by another company. If we could identify the latter, following the chain up would, theoretically, allow us to quickly identify 2-3 examples of M&A activity.
- This strategy quickly became bogged down by the overwhelming number of European prepaid satellite TV companies, such as Xtra TV in Ukraine and Telewizja Na Karte (TNK) in Poland. This reinforced our colleague's earlier findings that the vast majority of satellite TV companies, let alone prepaid satellite TV companies, are based in Europe.
- A 2014 Euroconsult study found that nearly 100% "of the growth in subscriptions, revenues, and the number of DTH ["direct-to-home" satellite broadcasting] TV channels by 2023 would be accounted for by emerging markets," which would ultimately comprise 80% of the satellite market.
- This growth pattern is driven by the fact that, while initially expensive, satellite TV reaches large regions and can prove cheaper to create and maintain than on-the-ground infrastructure, making it ideal for less-developed markets and areas with low population density.
- Prepaid TV product options were "mainly developed for people that could not acquire the regular pay-tv" options, such as the lower-middle class in Chile, many of whom lack direct access to the banking system. Thus, in 2008, DirecTV launched a prepaid option in Chile, but at the time only considered that option for the US.
- Where we did find articles on the US satellite TV market, they inevitably referred to DirecTV and Dish; this reinforces the fact that these two companies have been overwhelmingly dominant for at least 20 years in the domestic market as explained above.
While the above findings dashed our hopes of finding M&A activity between small providers (defined in our criteria as those with fewer than 1 million subscribers), we did some research into the history of the two giants.
- While DirecTV was passed between companies in the 1990s and 2000s and acquired its rival PrimeStar in 1999, there has not been any significant M&A activity since, apart from the aforementioned merger with AT&T.
- Dish was a bit busier. In 2011, the company acquired Blockbuster (obviously not a prepaid satellite TV company) and in 2012 it acquired the defunct companies DBSD North America, a "bankrupt wireless-spectrum holder," and TerreStar, a satellite telecommunications company. None of these acquisitions fits the project criteria.
Having exhausted all possible avenues, we concluded our research.