As we are watching keenly the ongoing anti-trust lawsuit aimed at blocking the $109 billion merger between AT-and-T and Time Warner at the federal courthouse of U.S. District Judge Richard Leon, one wonders that the U.S. DOJ's mindset is stuck in the yesterday's business model and playbook that has been recently challenged by the online streaming content. As the telecommunication industry's traditional source of revenue such as wireless has been dwindling fast enough, the key to surviving and thriving is to expand the industry's tentacle into content domain. Any vertical merger thus makes the marriage between content and distribution, and help partly the telecommunication companies fend off cord-cutting syndrome of millennial consumers.
First, the loss of wireless revenue, despite holding on to almost same number of subscribers, has to be mitigated by diversifying the business portfolio. So, for companies such as AT-and-T and Verizon, it's a matter of survival to get out of its core business. Thus the arrival of so-called Pay TV services being offered by the legacy Telecom companies. However, Pay TV market---both cable and satellite-- itself is shrinking now because of digital challenge being posed by PlayStation Vue, YouTube TV, Hulu Live, Fubo TV and Philo, in addition to Dish Network's own online product, Sling TV. These online video services are cheaper and appealing to a whole new generation of young people accustomed to carrying and using smartphones. In 2017, the subscriber loss to Pay TV companies is steep and substantial, according to Leichtman Research Group:
Dish (-995,000)
U-verse (-624,000)
DirecTV (-554,000)
Charter (-239,000)
Frontier (-184,000)
Comcast (-151,000)
Verizon FiOS (-75,000)
In the last year (2017), online TV subscriber base has grown significantly, including DirecTV Now (855,000) and Sling TV (711,000). Many of the subscribers fleeing the Pay TV segment are ending up with the online TV services of the same company (example: Dish Network to Dish's Sling TV; DirecTV to DirecTV Now), but the migration does not bring the same amount of revenue. It's more like losing a dollar, and trying to make it up with pile of dimes. Unfortunately, to make up each dollar, companies have to become creative to generate new sources of revenue. That's why vertical merger between content provider and distribution channel makes absolute sense. It's not a marriage of convenience, but rather a marriage of compulsion.
First, the loss of wireless revenue, despite holding on to almost same number of subscribers, has to be mitigated by diversifying the business portfolio. So, for companies such as AT-and-T and Verizon, it's a matter of survival to get out of its core business. Thus the arrival of so-called Pay TV services being offered by the legacy Telecom companies. However, Pay TV market---both cable and satellite-- itself is shrinking now because of digital challenge being posed by PlayStation Vue, YouTube TV, Hulu Live, Fubo TV and Philo, in addition to Dish Network's own online product, Sling TV. These online video services are cheaper and appealing to a whole new generation of young people accustomed to carrying and using smartphones. In 2017, the subscriber loss to Pay TV companies is steep and substantial, according to Leichtman Research Group:
Dish (-995,000)
U-verse (-624,000)
DirecTV (-554,000)
Charter (-239,000)
Frontier (-184,000)
Comcast (-151,000)
Verizon FiOS (-75,000)
In the last year (2017), online TV subscriber base has grown significantly, including DirecTV Now (855,000) and Sling TV (711,000). Many of the subscribers fleeing the Pay TV segment are ending up with the online TV services of the same company (example: Dish Network to Dish's Sling TV; DirecTV to DirecTV Now), but the migration does not bring the same amount of revenue. It's more like losing a dollar, and trying to make it up with pile of dimes. Unfortunately, to make up each dollar, companies have to become creative to generate new sources of revenue. That's why vertical merger between content provider and distribution channel makes absolute sense. It's not a marriage of convenience, but rather a marriage of compulsion.
