DIRECTV-EchoStar Merger: 5 Reasons Why It Will Happen The deal could allow the new company to offer more services for less money.
By Phillip Swann TVPredictions.com http://www.tvpredictions.com/mergeryes080406.htm Washington, D.C. (August 4, 2006) -- The TV technology industry is sharply divided over whether rumors of a DIRECTV-EchoStar merger should be taken seriously. Earlier this week, I offered five reasons why the merger will not take place. Today, I present five reasons why it will occur. And, next Tuesday (August 8), I will unveil my exclusive prediction on whether the deal will happen. So here are: 5 Reasons Why DIRECTV & EchoStar Will Merge 1. The High Cost of New Technology Both DIRECTV and EchoStar are preparing to spend billions on new satellites (and other equipment) to launch new High-Definition TV channels and other new video services, such as interactive Digital Video Recorders and Broadband-enabled set-tops. And the heavy investment is necessary to just keep pace -- with each other and the major cable TV operators, such as Comcast and Time Warner Cable. The merger would allow the companies to pool resources, saving money, time and manpower. 2. Rupert Murdoch's Influence In DC The Federal Communications Commission rejected EchoStar's attempt to buy DIRECTV in 2002 on grounds the merger would be anti-competitive; the commissioners feared the deal would result in higher programming fees because many satellite viewers would not have an alternative source of programming. That's what they said, that is. What the feds didn't tell you was that News Corp. chairman Rupert Murdoch waged an extensive lobbying campaign to reject the deal. The media mogul, whose empire includes Fox News, Fox Studios and the Fox Broadcasting Network, wields enormous influence in Washington. Murdoch's clout -- along with some political clumsiness by EchoStar during the federal review process -- were the primary reasons why the deal was rejected. Murdoch wanted to kill the 2002 deal because EchoStar had edged out News Corp. in the bidding process. He thought that he could still buy DIRECTV if the merger was rejected. And that's exactly what happened a year after the FCC vote. News Corp. purchased a controlling interest in DIRECTV. If DIRECTV and EchoStar were to merge today, they would have Murdoch on their side rather than as an opponent. That alone could make the difference. 3. Increased Competition And if Murdoch's influence wasn't enough, the two companies today would have a stronger case that the merger would not be 'anti-competitive.' The TV industry has changed dramatically in four years due to the launch of TV services from telcos AT&T and Verizon and the emergence of non-traditional video providers, such as the Internet and portable devices. In addition, cable TV service is now available in more markets. Today's satellite viewer has more programming options than ever before. Thus, it would be more difficult for the FCC to say the deal would hurt consumers and possibly lead to higher programming fees. 4. The Changing Political Winds Generally, the Republican Party is more sympathetic to merger proposals than the Democrats. The GOP now controls both the White House (and the FCC) and Congress, but that could change in 2008 due to voter unrest over Iraq, gas prices and other issues. If DIRECTV and EchoStar want to merge (ever), better to do it now while they still have friends in power. 5. EchoStar Up Against the Wall Murdoch and EchoStar CEO Charlie Ergen have butted heads for nearly 10 years, dating back to 1997 when the two companies unsuccessfully tried to merge. The deal fell through soon after Ergen had a shouting match with News executive Preston Padden. Some analysts say Ergen will never agree to a merger because he won't give up control. However, today, Ergen's back is up against the wall. DIRECTV, his chief satellite rival, is owned by the deep-pocketed News Corp. And the cable TV industry has more cash in reverse than ever before. For Ergen to compete, his company will likely have to spend beyond its means. Well beyond its means. Consequently, the question of who runs the company might seem like a small matter. ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list medianews@twiar.org To unsubscribe send an email to: [EMAIL PROTECTED]
