Did ATT and DIRECTV split?
Although AT&T paid $49 billion for DirecTV in 2015, this transaction ranks among the largest in the media industry. This approach was supposed to help AT&T grow into a content powerhouse and provide television services packaged with its cellular offerings. But in 2020 AT&T altered its plans, saying it would sell off its media sector, and therefore WarnerMedia will join with Discovery to form a new worldwide entertainment firm. Many then asked one question: did AT&T and DirecTV split?
The short and much simpler answer to it is – No, AT&T did not split up with, or sell DirecTV. Whilst AT&T sold off its stake in WarnerMedia in 2022 to merge it with Discovery, DirecTV continues to be directly owned by AT&T.
An Analysis of AT&T Inc.’s Acquisition of DirecTV in 2015
This acquisition occurred in 2015 when AT&T realized a strategic direction in video entertainment leadership and the bundling of video with its wireless services. Having video subscribers which were more than double the number of DirecTV’s 20 million subscribers which they got after acquiring the company meant that AT&T was nationally established and had content that it could deliver through mobiles and broadband.
The deal was to be set with an end view for customers to be able to access more cohesive wireless, video, and broadband solutions. It would also benefit AT&T to own high-quality content from DirecTV since it would enable the company to target ads based on the consumers’ viewing patterns and geographic locations.
AT&T had decided to separate WarnerMedia in 2022 due to several factors
Fast forward to 2022, AT&T Internet decided to spin out WarnerMedia and merge it on Discovery with only 7 years of operation after it bought TimeWarner for $85 billion.
The company realized that the integration of media content production and distribution with communication and advertisement was not sustainable following the strategic transformations and executive transitions that AT&T underwent. The final consideration that led to the decision was the likely expense of paying off large debts arising from the deals.
Thus, in the face of these pressures, AT&T shifted its focus to significantly ramp up its four strategic connectivity assets – 5G wireless, fiber broadband, and business wireline services. The idea of splitting WarnerMedia and merging it with Discovery was towards making a standalone entertainment company.
The key event that transpired at DirecTV after WarnerMedia spun off was the announcement of AT&T’s acquisition of DirecTV in January 2015.
Despite AT&T selling off most of its stake in WarnerMedia in 2022, DirecTV was not included in this sale and is still owned by AT&T. DirecTV remained as a bundled pay-TV service that is being sold to AT&T connectivity subscribers.
There were also buzzes that AT&T plans to sell a minority stake in DirecTV to private equity in 2022. This would have been beneficial to AT&T in the sense that the company would be able to garner some value without ceding full control.
A sale would follow major subscriber declines over the years with DirecTV reaching its apex with 21 million customers in 2015 and reducing to 15 million in 2021. Growing competition from other streaming providers and cord-cutting has impacted the cable and satellite TV industry.
However, it should be noted that even with the new trend of shrinking subscription figures, DirecTV continues to generate positive cash flow. Aligning it with AT&T’s broadband and wireless services has synergistic possibilities that provide value.
To sum up, the future of video in the context of AT&T can be discussed as follows:
Although AT&T continues to remain the owner of DirecTV for the present moment, the trend over the long run is a bit foggy. A confluence of shrinking satellite TV subscriptions combined with a highly saturated market for over-the-top (OTT) streaming points towards further disruption in the video space.
Since then, AT&T has invested in a growing streaming service called AT&T TV, which delivers live sports, news, and other channels over the internet without the need for a satellite dish or cable box. The company also has equity interest in Hulu and while it does not sell individual streaming apps it can offer bundled services in the future.
The future of the pay-TV market also poses a problem to AT&T as consumers are increasingly moving away from cable to online streaming and downloads. This is where it is spun off into a joint venture with a private equity firm or selling off part or the whole business.
Still, as of now, the answer is no – even though AT&T has cut ties with WarnerMedia in recent years, DirecTV is still an essential part of its portfolio as the company adapts to the new streaming-centric landscape of video services. So the short answer to this question is still no, AT&T and DirecTV have not officially divorced yet.
Upgrade to faster, more reliable AT&T Fiber Internet today! Call us at +1 844-905-5002 and get connected with speeds that keep you ahead.