AT&T buying DirecTV for $49 billion

I guess those people will stop coming to my door trying to sell U-verse. The conversation usually goes like this:

Them: Would you like to sign up for AT&T U-verse? Me (already knowing the answer before I ask): Do you have NFL Sunday Ticket? Them: No, but we have NFL Red Zone! Me: It's not the same. Them (hanging head): I know . . .

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So much for that:

With 5.7 million U-verse TV customers and 20.3 million DirecTV customers in the U.S., the combined AT&T-DirecTV would serve 26 million. That would make it the second-largest pay TV operator behind a combined Comcast-Time Warner Cable, which would serve 30 million under a $45 billion merger proposed in February. AT&T and DirecTV expect the deal to close within 12 months. Under the terms agreed to Sunday, DirecTV shareholders will receive $28.50 per share in cash and $66.50 per share in AT&T stock. The total transaction value is $67.1 billion, including DirecTV's net debt. CBS News senior business analyst Jill Schlesinger said on "CBS Evening News" the reason for the merger is simple. "AT&T wants content. DirecTV has content," said Schlesinger, adding that DirecTV's substantial customer base extends into Latin America. Acquiring DirecTV would allow AT&T to obtain a much larger role in the pay TV market. According to the National Cable and Telecommunications Association, 85 percent of the country has pay TV. Even with all the talk of cord cutting and people taking to the Internet to stream videos, pay TV is a big industry. However there is a trend towards abandoning cable TV. Schlesinger reported that 6.5 percent of U.S. households canceled their cable bundles in the last year.

I think that last point is more significant than the story makes it sound. The emergece of smart TVs is already seeing a lot of people eschew traditional paid content services entirely in favor of online sources like Apple TV, and that's only going to grow as more content producers figure out they can get their material in front of audiences without having to strike a deal with a cable channel, or start their own. Actually you can start your own. It just doesn't have to be on DirecTV, or U-verse, or Comcast, or whatever. Short-term this is probably a good bet for AT&T. They've been trying for years to make a significant dent in DirecTV's subscriber base and they weren't making much progress. Since AT&T as a whole has plenty of capital to put toward acquisitions, why not buy what you can't beat? DirecTV ropes you in with fantastic discounts that usually last for up to a year, and then they sock you by spiking up to the real price. And they really make money on premium movie and sports packages. We happily pay more than $50 a month extra during football season so we can see the games we want on Sundays, figuring we'd spend at least that much on one trip to a sports bar anyway. I'm thinking about getting MLB Extra Innings too. Over the next one to three years, AT&T will make some serious money selling stuff like that. But over time, I don't know. Right now, the idea of online content is still a bridge too far for a lot of people, who hear that term and think about watching TV on their computers. But that will change as people get used to the idea that it's as easy to watch online content on their TVs as it traditionally has been to watch cable or satellite - especially when it's common for everyone to be able to do it without connecting their laptop to the TV with an HDMI cable. Oh, by the way, DirecTV is awesome generally speaking, but it's most definitely not awesome when it starts raining or snowing. If I were running AT&T, finding a solution to that problem would be one of my top priorities. Doesn't mean it will be theirs, though. What do I know? I'm just a customer.