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MORNINGSIDE GROUP

2014 YALE CASE COMPETITION. MORNINGSIDE GROUP. INIGO BERGARECHE LUKAS DIDON YONI PASTERNAK SOPHIA PORRINO XIAOJIE ZHING. Recommendation. DISH should offer $ 39.2 B in stock to consolidate with DirecTV. Internet TV. Multi- Play Bundle. Satellite TV.

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MORNINGSIDE GROUP

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  1. 2014 YALE CASE COMPETITION MORNINGSIDE GROUP INIGO BERGARECHE LUKAS DIDON YONI PASTERNAK SOPHIA PORRINO XIAOJIE ZHING

  2. Recommendation DISH should offer $39.2B in stock to consolidate with DirecTV Internet TV Multi-Play Bundle Satellite TV Gain operational and organizational efficiencies Gain 35M customers Leverage with customers Respond to seismic industry changes Access more customers and international market Access content rights Increase advertising revenue Capital for wireless acquisition Capital for internet Leverage with content providers

  3. Industry Overview Value Chain Description Key Players Creation Content creators Right holders Fox, BBC, Disney, Sony, Universal Aggregation Right dealers Program packages Content agregators ESPN, ABC, Discovery HBO, FOX, Veoh, Google Netflix, Hulu Distribution Network operators Access providers TV: Comcast, DirecTV, Dish, TWC Internet: Comcast, AT&T, Verizon Phone: Verizon, AT&T, Sprint, Century Link Consumption Device users Device manufacturers Apple, Samsung, LG, HTC, Cisco

  4. Satellite TV Trends • 35M new customers • 96% market share of 2.3% US revenue growth • Fast-growing (24%) Latin American market • Leverage with customers and content providers IBIS world

  5. Internet TV Trends • Increaseadvertising revenue (DirecTV- FreeWheel) • Utilize access to content providers • DISH: Blockbuster & Disney • DirecTV: NFL and other sports • Enter OTT market: • Very fast growing (50% YoY) • $20B projected 2015 US market • 20% all video consumption by 2016 IBIS world

  6. Multi-Play Bundling Trends • Trend towards bundling (2% predicted growth rate) • Utilize DISH’s spectrum (worth $12-25B) to enter wireless market (acquire T-Mobile) • Internet TV traffic on wireless networks is steadily increasing Digital TV Research Ltd.

  7. Deal Structure • Offer a bid of $39.2 B in stock to DirecTV • Merge to form a new venture DISHDirecTV • Max bid $47.3B

  8. Synergies • Reduce competition • Increase leverage over content providers and customers • Improve operating efficiency (estimated 1.7B annual cost saving) • Increase financial flexibility

  9. Organizational Structure

  10. APPENDIX

  11. Regulatory landscape • Anti-trust hurdles: merger could be denied • 1 M more subscribers than Comcast & TWC (34 M vs. 33 M) • Subscribers occupy overlapping geographic regions • Direct competitors (however increasing competition from Internet TV) • Undermine Comcast & TWC merger • Regulators might become concerned about two giants dominating the market and deny both mergers • Good Timing & Regulatory Feasibility needs to be seeked • Different regulatory environment now than in 2002 when bid failed • Rise of cord-cutting makes a monopoly less of a risk now • In 2008 two competing satellite companies received permission to merge (Sirius and XM satellite) • Dish-DirectTV merger would counterbalance Comcast & TWC giant • Dish and DirecTV (unlike Comcast & TWC) wouldn’t have a chokehold on Internet TV • Satellite TV can be bundled with Internet service, but it’s either through partners or, • in Dish’s case, through satellite-based Internet, which is not an adequate option • Historically, second-term presidencies avoid antitrust cases

  12. Max Bid

  13. REFERENCES Accenture’s Bringing TV to Life Series: Issues I-III; http://www.accenture.com/SiteCollectionDocuments/PDF/ Accenture_Communications_Media-Entertainment_OTTV_Future_of_TV.pdf; IBISWorld’s Industry Research: Telecommunications, Satellite TV, Internet Industries http://ir.netflix.com/long-term-view.cfm http://www.nytimes.com/2010/12/06/business/media/06rabbitears.html?pagewanted=all&_r=0 http://www.forbes.com/sites/dorothypomerantz/2014/03/31/why-a-directv-dish-network-merger-might-be-different-this-time-around/ http://www.forbes.com/sites/realspin/2014/02/27/competition-will-not-survive-the-comcast-time-warner-merger/ http://www.businessweek.com/articles/2014-03-27/will-directv-and-dish-catch-cables-merger-fever http://www.businessweek.com/news/2014-03-26/ergen-directv-overture-puts-dish-in-play-as-at-and-t-waits-real-m-and-a http://news.investors.com/technology/033114-695292-dish-stock-valuation-spectrum-monetization-network-build-out-scenarios.htm#ixzz2xgbOkryr http://www.theregister.co.uk/2014/03/31/dish_directv_merger/ http://variety.com/2014/digital/news/dishs-disney-deal-gives-the-satcaster-rights-for-a-virtual-mso-foray-but-making-that-a-reality-wont-be-easty-1201129635/ http://variety.com/2014/biz/news/new-data-confirms-pay-tvs-slow-decline-will-cord-cutting-trickle-become-become-gusher-1201139302/ http://247wallst.com/media/2013/10/10/would-a-directv-dish-merger-still-make-a-new-pay-tv-media-monopoly/#ixzz2xhMcmPns http://www.fool.com/investing/general/2014/03/27/will-a-directv-dish-network-merger-happen.aspx http://beta.fool.com/valuentum/2013/03/20/-185/27508/ http://www.digitaltvnews.net/?p=21612

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