Now that’s a big buyout:
AT&T Inc plans to pay $48.5 billion to buy DirecTV, in the latest sign that the wireless industry and the U.S. television market are set to converge as customers consume more video on their mobile devices.
The deal, announced on Sunday, highlights AT&T’s pressing need for fresh avenues of growth beyond the maturing U.S. cellular business, which has become increasingly competitive.
The combination with DirecTV, the No.1 U.S. satellite TV provider with 20 million customers, would beef up Dallas-based AT&T’s packages of cellular, broadband, TV and fixed-line phone services.
There’s something missing from the deal, however — something Comcast got when they bought NBC.
AT&T-DirecTV (or whatever they end up calling this beast) has plenty of content distribution, but no content production. Netflix’s CEO famously said a while ago that it was his goal to turn his company into HBO before HBO turned into Netflix. That is, Netflix had to start producing its own quality shows before HBO became a distributor. Hence House of Cards and all the other Netflix originals. The quality of the shows has hit and miss, but that’s the nature of the entertainment business. But HBO’s model has been hit also by The History Channel (Vikings), Showtime (Homeland, Dexter), and even the once-laughable Skinemax has a quality hit on its hands with Banshee.
And those are just the examples I can come up with over my first cup of coffee.
If AT&T wants to expand its distribution, they might have to produce their own quality content. That’s great for customers if they do, but today’s $48 billion buyout only gives them an existing distribution network for other people’s content.
For a lot less money they could have tried to undermined DirecTV’s aging model, rather than simply tack it onto their own.