With AT&T (T +0.04%) having an agreement to buy DirecTV (DTV +0.00%), speculation has risen that Dish Network (DISH +0.00%) will need to either merge with another company or be bought out.
In the changing media world, Dish -- assuming the AT&T deal goes through -- would have the ability to offer both pay television service and broadband Internet. That puts the company on a level playing field with its cable competitors who have always been able to offer both. Dish would be at a distinct disadvantage as an independent company that only offers one service. Unless the company dropped its price to well below that of its rivals, there would be no real reason for anyone to pick Dish when competitors can offer discounts to bundle multiple services.
"Dish is screwed," said panelist Daniel Kline on Business Take, the show that gives you the Foolish perspective on the most important business stories of the week. "They are in a position where their business model no longer makes sense."
Kline went on to explain to Business Take host Jason Hellmann that satellite got its start as an alternative to cable companies that had a monopoly in most areas. "If we wanted cable [where I grew up] we had to have Time Warner Cable (NYSE: TWC)."
"That's still the way it is in most places in the country," Hellmann said.
Though cable still has a monopoly aside from satellite in many markets, the option now exists to cut the cord and go with TV-like products over the Internet. Both DirecTV and Dish are even working on products that offer packages of cable channels through a streaming service that does not require a cable or satellite subscription. Any streaming option, however, does require an Internet connection and Dish will be the only pay-TV provider not set up to offer one. if DirecTV loses a subscriber to cord-cutting, it can still retain the customer for broadband (and maybe even charge him a little more). The cable companies can do the same.
Dish -- without a partner or being acquired -- can't compete. Even if people want satellite, Kline said, Dish will be less convenient because customers are less likely to pay for a service requiring paying someone else for broadband access. That will give DirecTV/AT&T a huge advantage.
Kline and Hellmann went on to lay out who might buy Dish with Kline making a case that an Amazon (AMZN +3.83%) acquisition of Dish makes surprising sense. Who do you think should makae the deal? Can Dish survive on its own? Watch the video then share your thoughts in the comments section below.
