Business has gotten only more difficult for Charlie Ergen, the founder of the satellite TV giant Dish, since the government blocked his bid to combine his company with DirecTV in 2002.
Since then, streaming services have demolished the traditional TV industry. Cable and satellite companies have lost about 30 million customers, leaving just 50 million. And the outlook for traditional providers has grown so dire that Ergen warned two years ago that Dish and DirecTV were likely to “melt away” without a deal.
The challenges ahead look just as worrisome. Dish’s parent company, EchoStar, sought to fend off declines in Dish’s business by spending billions building out a 5G wireless cellphone network. It now faces the prospect of fending off slicker, faster competitors like Elon Musk’s Starlink and Amazon’s Project Kuiper, which put its first satellites in space last year.
So Dish and DirecTV are giving a tie-up another try. DirecTV is in the advanced stages of acquiring Dish, two people familiar with the situation told DealBook, requesting anonymity to discuss confidential negotiations. News of the merger discussions, which could still fall apart, was reported earlier by Bloomberg.
The latest attempt underscores how much the entertainment industry has shifted over the last two decades. And it raises a perhaps more thorny question: Did the government fail to see how the TV market was changing when it blocked the deal the last time?
The television landscape looks nothing like it did 22 years ago. Back in 2002, the Justice Department and the Federal Communications Commission worried that a merger between Dish and DirecTV would hurt rural subscribers. But many out-of-the-way pockets of the United States no longer rely on the satellite companies as the sole providers of TV. Broadband access has exploded as companies like Comcast and Charter have expanded further.
Even in rural areas, where Dish and DirecTV previously faced little competition, the number of entertainment providers has skyrocketed as companies like Disney, Warner Bros. Discovery and Paramount have launched streaming services.
The government now regards these new players as viable competitors. The ascent of Netflix and other rivals was part of AT&T’s argument to beat back the Justice Department’s rejection of its $84.5 billion acquisition of Time Warner in 2018.
Dish and DirecTV have atrophied since their attempts to merge were blocked. Dish looks particularly frail: It has about $2 billion in debt coming due in November, threatening the company with insolvency, said Craig Moffett, an analyst for MoffettNathanson.
The two companies will almost certainly be better off in the short term if they are allowed to merge, Moffett argued.
“The deal is so urgent partly because these businesses are in a rapid death spiral,” he said. “Satellite operators are one-trick ponies. As linear video goes the way of the buggy whip, so does satellite TV.”
But more competition may still not be enough competition. The Justice Department was concerned as recently as 2020, when a similar deal was being contemplated, that 5G service in rural areas was not sufficiently widespread to allow for a deal, a person familiar with the department’s thinking told DealBook. It may still be years until cellphone providers are able to deliver high-speed internet to homes that is as fast as and efficient as services delivered by the likes of Starlink. And there’s still plenty of direct competition between the two in vulnerable rural areas, antitrust experts said.
And companies in peril don’t always get to merge. That’s because regulators do not want companies to use industry challenges as an excuse or, more nefariously stated, a ploy. Some argue that one deal in a challenged industry can set off a race for others to merge, leaving many companies weaker, not stronger. (See the airline industry.)
“Consolidation generally creates opportunities for the bigger companies,” Lou Borrelli, head of the National Content and Technology Cooperative, a cooperative of regional cable and broadband providers, told DealBook. “And the smaller companies are not always in a position to take advantage of those kinds of deals.”
That’s part of the reason the “failing firm defense” has such a high bar.
“Just because it might be a slow-melting ice cube doesn’t mean you should sell to the largest competitor on the market,” Assistant Attorney General Jonathan Kanter told DealBook in June.
How you view the deal may depend on how you feel about SiriusXM. The government allowed XM and Sirius to merge in 2008, in part because of the prospect of competition from HD radio, iPods and MP3 players. Seventeen years later, SiriusXM has annual revenues of $8.75 billion — and is a major provider of live radio to drive-time commuters across America.
Some say that was an example of the government’s rightly allowing a deal so a company could position itself for the risk of powerful new rivals. Others argue that the merger allowed a pervasive audio provider to grow even mightier in the face of threats that never truly materialized.
If the Dish and DirecTV deal closes, such a debate seems unlikely.
“At the rate at which these businesses unravel, you’re talking about maybe buying yourself one or two extra years,” Moffett said. “That’s all.”
— Lauren Hirsch and Benjamin Mullin
IN CASE YOU MISSED IT
OpenAI faced more executive departures amid a huge fund-raising push. The artificial intelligence company behind ChatGPT sought to reassure investors after Mira Murati, its chief technology officer, became one of the latest leaders to leave. OpenAI is looking to raise $6.5 billion in a funding round that is being led by Josh Kushner’s Thrive Capital and that would value the company at $150 billion.
Mayor Eric Adams of New York pleaded not guilty to bribery and fraud charges. Prosecutors have accused the former police captain, who ran for office on a law-and-order platform, of accepting more than $100,000 in illegal gifts from Turkey. Adams has said he will remain in office, but potential rivals, including Andrew Cuomo, the former governor of New York, were said to be weighing a possible bid to replace him.
The presidential candidates sharpened their economic pitches. Vice President Kamala Harris tried to make her case that she is a pro-business capitalist and pragmatist who would defend the middle class. Donald Trump outlined a populist plan to penalize companies that manufactured overseas and warned John Deere that he could impose tariffs on the company if it moved jobs to Mexico.
The Justice Department accused Visa of monopolistic practices. The Biden administration filed an antitrust lawsuit against the company, accusing it of signing de facto exclusive agreements with merchants and banks and threatening vendors that used rival services with higher fees. Visa called the suit “meritless.”
Can Lina Khan hold on?
From Wall Street to Silicon Valley, everyone wants to know what’s next for Lina Khan.
On Wednesday, the youngest-ever chair of the Federal Trade Commission reached the end of her three-year term, during which she helped to overhaul the government’s approach to antitrust enforcement and brought a slew of lawsuits against major corporations.
Khan, 35, can remain in her seat indefinitely, unless she is replaced. There are factions rooting loudly for each of those outcomes.
Under her leadership, the F.T.C. has brought antitrust cases against the tech giants Meta, Amazon and Microsoft, sometimes employing ambitious legal arguments. The agency has tried to ban almost all noncompete clauses and blocked Lockheed Martin and Nvidia from making multibillion-dollar deals.
A powerful bipartisan cohort believes the F.T.C. chair is stretching the scope of antitrust law past its legitimate limits, rashly working to redefine the bounds of key concepts such as monopolization.
Khan, her staff and her allies essentially contend the opposite: that her leadership is restoring the role of robust, active antitrust enforcement in a legal and economic system that for too long has let those regulatory muscles atrophy to the detriment of consumers and healthier market competition. Some Democratic donors connected to finance and tech have publicly campaigned for Kamala Harris to remove Khan as chair of the F.T.C. if the vice president wins the election. The campaign declined to comment on whether Harris would support Khan staying in her position.
The Times’s Talmon Joseph Smith sat down with Khan at a table in her office — fittingly decorated with the board game Anti-Monopoly, a trustbuster take on the classic version — to discuss her transformational tenure and the road ahead. The interview has been condensed and edited.
There seems to be a visceral distaste for you from many on Wall Street, including mergers-and-acquisitions lawyers and market participants. Do you think that you are misunderstood?
I think you have to first of all figure out which are the voices that you’re focusing on. Look at any of our comment dockets online. We got 25,000 comments from people across the country saying, “Here’s how a noncompete has devastated my life, and here is how the F.T.C. eliminating them will make my life better.”
In Washington, it’s very easy to privilege just some set of voices and not another set of voices. And so we try to open our doors and make sure we are keeping the full country in mind, rather than people who have access to power, or a reporter they can call up and gripe to, or a member of Congress.
One of Wall Street’s arguments against your approach is that acquiring a company that might seem like a competitor is actually part of what drives healthy markets.
First of all, my role is not one of a policymaker saying thumbs up, thumbs down on a merger. We enforce the law. I get it. There are probably deal-makers out there who wish we didn’t have the antitrust laws. And that’s a thing that you can advocate for with Congress.
I also think it’s interesting that over the last couple of decades, there have been a set of case studies on mergers that were permitted to go through on the basis that there would be efficiencies passed on to consumers, or to other market participants. A lot of times, those efficiencies don’t actually materialize, and when they do, if you don’t have sufficient competition in the market, the companies are not going to have an incentive to pass those efficiencies on to everybody else.
To what extent have anticompetitive practices and consolidation contributed to the inflation that we saw from 2021 through 2023?
If you’re not enforcing antitrust, you’re allowing decades of consolidation that can create inflationary spikes more readily, because your system as a whole is less resilient to that disruption.
Second, a more concentrated market, when you have fewer players, is more easily going to be able to coordinate to hike prices or to keep prices high.
I would argue Kamala Harris has been talking your book as part of her campaign strategy. And yet, there’s this interesting chatter of, “Oh, does Lina Khan stay on?” Do you ever worry that your work could get cut short?
I can’t predict what’s going to happen in November, or after that.
You’ve not gotten any whispers, any word that you will not be wanted in a Harris administration?
No, I think to the contrary. We’ve seen the vice president note how she has been a prosecutor taking on illegal practices by corporations that were harming homeowners, that were harming patients, and that’s the work the F.T.C. does as well.
Thanks for reading! We’ll see you Monday.
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