DirecTV bought its biggest rival to avoid being bullied by the TV giants

• DirecTV and Dish decided to team up in the face of constant subscriber losses.
• DirecTV hopes the deal can make it a one-stop shop in a fragmented media landscape.
• But there’s another clear goal for DirecTV: gaining more leverage over content providers.

DirecTV knows it needs leverage to survive in a battered TV industry plagued by cord-cutting, so it’s joining forces with one of its biggest rivals.

Two decades of flirtation between DirecTV and Dish Network culminated in a long-rumored deal unveiled Monday. DirecTV will absorb $9.8 billion of Dish’s debt, and private equity firm TPG will own the entire satellite TV giant after buying AT&T’s stake in a separate move.

The timing of this tie-up between the two major satellite TV providers is no coincidence.

DirecTV is fresh off a hostile dispute with Disney that left its customers without channels like ESPN and ABC for nearly two weeks at the start of football season, which is a big driver of pay-TV signups. The companies eventually reached a truce in which each appeared to win concessions, though it won’t be clear who won until the details are finalized.

Like all pay TV providers, DirecTV has been crushed by cord-cutting over the past decade or more. The satellite titan hopes to stem the tide by offering weaker, genre-based packages and streaming services at no extra cost, though industry watchers doubt these moves can reverse the decline.

But unlike Charter and Comcast, which have broadband businesses to fall back on, DirecTV doesn’t have a clear backup plan outside of its pay-TV package.

With that in mind, media companies could try to develop DirecTV. That’s one reason the TV provider negotiated so aggressively with Disney and even went on the offensive by teaming up with rival Dish. The move might not be a home run, but it could at least help DirecTV avoid a strikeout.

“I don’t know that it’s a game changer,” Corey Martin, chairman of entertainment law firm Granderson Des Rochers’s Entertainment Finance Practice, said of the deal in an interview with BI. “I think it allows them to continue to have a seat at the table for the foreseeable future.”

DirecTV may need to fight to survive

DirecTV has a survival plan: It wants to become the ultimate intermediary between content providers and consumers. It hopes to survive by bringing traditional TV channels and streaming services into one place and establishing itself as a central interface, similar in some ways to the way Spotify aggregates music from major labels. It’s also similar to the pitch made by TV OS heavyweights like Roku and Amazon.

“We need an aggregator in the space that can bring together all the content you want to watch, not based on the studio that’s creating it,” Jon Greer, head of communications for DirecTV, told Business Insider.

While streaming has given consumers plenty of entertainment options, it has also created headaches. There is so much content that it can be difficult to find quality shows and movies, and the fragmented landscape can be difficult to navigate. Sports fans are having it especially hard, especially since the launch of sports streaming service Venu was blocked at the end of August.

DirecTV CEO Bill Morrow told investors and analysts in a webinar on Monday that while customers love watching shows on demand and on the platform of their choice, “they’re agonizing over how the pricing works, how to manage the account across multiple subscriptions, where to find their content and navigate each portal differently.”

These issues, plus the ever-increasing prices of streamers, have helped bundles make a comeback. And early evidence suggests deals like the Max-Hulu-Disney+ bundle are popular.

DirecTV’s fantasy is that consumers are tired of paying for a bunch of services and turning to them for a one-stop solution.

Implicit in the satellite provider’s strategy is the assumption that media companies need their help to build highly profitable direct-to-consumer businesses.

“This will again allow us to work with programmers in a way that is not so much about harassment,” Morrow said. “It’s about collaboration.”

But there’s a space between bullying and collaboration, which is where the relationship between TV distributors and programmers usually lies. In that context, the tie-up between DirecTV and Dish could give it the leverage it needs to try to turn its future vision into reality.

“The relationship with the programmer is pretty spotty when they know their market power, they exercise their market power,” Greer said. “We never want to do that, but we need to be able to have scale to be able to have these different conversations with programmers.”