DirecTV, meet Dish TV. Once again.

Because they basically do the same thing – deliver video over satellite communications platforms at scale – Dish Network and DirecTV’s parent AT&T have sparked fresh speculation about a possible combination of their pay TV operations. The trigger was Dish’s surprise announcement that it would turn to AT&T, and away from T-Mobile, as Dish’s partner in providing infrastructure for the Dish 5G wireless network that’s now evolving.

The MVNO flip-flop led many to believe that a still-bigger deal might be in the works, with the end game being a combination of the two U.S. satellite television platforms, Dish TV and DirecTV, along with their streaming video offshoots.

Given the scale and scope of the 10-year AT&T/Dish MVNO arrangement, it’s hard to believe the subject didn’t come up at least casually during negotiations. History also supports the idea. Dish and DirecTV nearly came together in 2001, before a proposed combination of the two platforms was nixed by the Justice Department. Six years later, the two came close again before Dish Chairman Charlie Ergen reportedly scuttled the talks. Now, the conventional wisdom is that a combination is more likely to pass regulatory muster.

One reason is that much has changed, with both Dish and DirecTV feeling the sting from accelerating cord-cutting that has resulted in severe erosion of their subscriber bases. Although almost every U.S. pay TV operator is feeling the pain here, the satellite TV category is by far the hardest-hit, accounting for nearly two-thirds of the net subscriber defections recorded last year by major U.S. MVPDs, despite representing only about 30% of the category. In July, AT&T reported another subscriber loss in Q2, with DirecTV accounting for the majority of the 473,000 AT&T video subscribers that vanished in the period. Dish’s satellite TV service, Dish TV, shed 132,000 subscribers in the second quarter.

Thus, given the budding relationship on the wireless side, and the possibility that regulators might take a more permissive stance, the news has been filled with studied “what ifs” about a possible satellite TV combination. A key presumption is that AT&T, which maintains majority ownership of DirecTV despite a recent spinoff arrangement, could authorize such a deal.

Next? A big question in that context is: what would a DirecTV/Dish alliance look like, and what role would it play in a shifting video ecosystem?

We already know about the scope. DirecTV has around 11 million U.S. subscribers (per our estimates based on the AT&T latest quarterly financials), and Dish TV had 8.55 million as of June 30. An outright merger would create the largest U.S. pay television distributor, edging Comcast and its 18 million residential video customers. Programmers might be rightfully uneasy about dealing with a single company that controls such a large chunk of the market.

But would size really matter? No matter what efficiencies and scale a merger would bring about, there’s little reason to believe a larger satellite TV company would find a way to halt the bleeding purely because it is…larger. After all, one of the main instigators of the cord-cutting phenomenon is a consumer embrace of on-demand video, a migration that flies in the face of the core satellite TV offering, which remains very much centered on linear channel delivery, and which lacks a worthy mechanism for providing high-speed Internet.

Instead, one of the attractants would be the internal economics. Margins would improve if the companies could cut back on duplicative satellite fleets, combine on-the-ground infrastructure, and shed thousands of employees. Harvesting cash was the central premise behind the creation of a new entity, co-owned by AT&T and TPG Group, that agreed to take on management control of DirecTV and its streaming services earlier this year. Nobody in this deal was fooled into thinking satellite TV is poised, categorically, for a market rebound. Rather, the thinking is that modifications in the operating approach and careful expense management can provide a steady stream of cash that justifies the investment, even as the market shrinks. As for market positioning, Dish TV tends to have a different orientation than DirecTV, with a greater focus on serving rural-market customers. This could work to the favor of a merged entity, as DirecTV could presumably benefit from Dish’s expertise in attracting and retaining subscribers outside of DirecTV’s own strongholds, where cord-cutting tends to be more severe thanks in part to superior broadband Internet availability.

And finally, no accounting of a possible merger can take shape without thinking about the streaming video implications. Both companies operate their own Internet-delivered video services, with the new DirecTV ownership entity responsible for managing the AT&T TV multichannel video service, and Dish operating the Sling TV service. A keen focus of a merged company would be migrating many satellite TV defectors to these platforms, which offer cost savings and improved margins versus the satellite systems. So in one way, we can think of a Dish/DirecTV alliance as a giant vacuum that’s designed to tip the scales: If cord-cutting is going to happen, the companies would just as soon prefer that their streaming outlets, and not somebody else’s, capture most of the defections. Doing that together, rather than apart, might work better.

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