AT&T, DirecTV Merger Could Hamper Cord-Cutting

AT&T’s planned merger with DirecTV is far from a done deal. Among the objections that have been raised is one stemming from a filing this week with the Federal Communications Commission. There is now concern that the merger would make it more difficult for consumers to cut their cable-TV cords.

The companies told the FCC in a public interest statement that the merger is the only way they would be able to compete with the likes of Comcast and Time Warner Cable — two companies that also have a pending merger.

This is largely because DirecTV cannot offer broadband, and thus is unable to provide consumers with a bundle including high-speed Internet service. Such bundles, the companies claim, are consumers’ preferred choice for purchasing Internet, TV and phone services, and the merger would allow DirecTV to offer them to its customers, many of whom live in rural areas.

Smaller Territory

The second key point laid out in the filing is that AT&T currently is able to provide bundles only in 22 states. Since that is a smaller territory than its competitors have, AT&T says it need to pay higher prices for video content.

The merger would allow it to offer TV services throughout the whole country, which would enable it to negotiate cheaper prices for content because of its larger scale, AT&T argues. It could then pass those savings to customers and pressure competitors into lowering their prices as well.

The merger would allow the companies to “marry complementary assets,” they said, allowing them to provide bundles in a way they would not be able to by themselves or through a contract with each other.

“The FCC wants to promote competition,” Rob Enderle, principal at the Enderle Group, told the E-Commerce Times. “They want to make sure nobody owns the airwaves. They don’t want to re-create the RCA of the past, where there’s one big company that controls most of the content.

Control Concerns

“Their goal is to ensure the airwaves remain to a large extent free to have competitors,” Enderle added.

“They don’t want any one company to have too much control, because that control would lead to issues with regard to the content we receive, the prices we pay, and everything else. They also have to make sure nobody does anything that damages the capabilities of others to broadcast information,” he explained.

“I think there’s probably less they’re going to be concerned about with an AT&T-DirecTV merger than with a Comcast-Time Warner merger, for example,” telecom analyst Jeff Kagan told the E-Commerce Times.

“AT&T is a telephone, wireless and Internet company, and DirecTV is a satellite television company. They already resell DirecTV. It’s not like you’re removing a competitor or changing the marketplace. They’re going to make DirecTV stronger,” he pointed out.

“The problem with DirecTV is that the industry is moving ahead and DirecTV can’t,” Kagan continued. “DirecTV on its own cannot. If they don’t merge with AT&T, what’s going to happen? I think that’s the bigger story. If they don’t merge with AT&T, DirecTV may be toast.”

Competition Issues

Nevertheless, the proposed US$48.5 billion merger between AT&T and DirecTV is facing broad criticism. One objection is that having another large communications merger will reduce competition, with fewer choices potentially resulting in higher prices.

AT&T has argued against the pending Time Warner Cable-Comcast merger, stating that the combined conglomerate would put it at a disadvantage. For their part, Comcast and Time Warner Cable have argued their merger would level the playing field.

This week’s filing by AT&T and DirecTV, which was required as part of the FCC’s regulatory review process to determine if the merger is in the public interest. It informally starts the countdown for the agency’s 180-day consideration period. The merger also needs approval from the Department of Justice, which will examine antitrust issues.

Cutting The Cord

Although AT&T and DirecTV hope to offer consumers bundled services, a growing number of customers are trying to free themselves of satellite- and cable-TV service altogether. Many consumers are turning to streaming services such as Netflix, which allows them to choose what they wish to watch, rather than having the burden of paying for fixed bundles that include TV channels they will never watch.

Half the participants in a recent survey said they would leave their cable companies, if possible, but the choices were simply too limited. Many would cut the cord if more content were available online, including live sports.

AT&T has a clause in its agreement with DirecTV that allows it to back out of the deal if the latter fails to renew its contract with the National Football League for the Sunday Ticket. That exclusive deal might make it more difficult for sports fans to ease away from their satellite-TV service.

Broadband Smokescreen

Meanwhile, although AT&T claimed the merger would allow it to offer broadband Internet service to 15 million rural customers, that could be a smokescreen. The company already had announced plans to expand its broadband service a few weeks before announcing the proposed merger.

Meanwhile, AT&T reportedly failed to follow through on similar promises after it merged with BellSouth.

“There are multiple mergers on the table right now,” Kagan pointed out.

“There’s AT&T-DirecTV, Time Warner Cable-Comcast, and Sprint-T-Mobile. If any one of those mergers were the only merger on the table, I think it would be a lot more difficult to win approval. But since there’s three mergers on the table, and one last year (Sprint-SoftBank), we’re obviously moving into a phase of consolidation, building and growth in the industry, similar to what happened 10 years ago,” he observed.

“If that’s the case, the FCC and SEC will be looking at these mergers differently, and they’ll either say yes or no to them all,” suggested Kagan.

“It’s not a single merger redefining a company, but it’s a number of mergers redefining the industry: what it means to be a competitor, the services that you offer, and the customers you can offer them to,” Kagan said. The FCC wants competitors “to be able to grow, do well and compete. They want them to serve the consumers.”

Kris Holt is a writer and editor based in Montreal. He has written for the Daily Dot, The Daily Beast, and PolicyMic, among others. He's Scottish, so would prefer if no one used the word "soccer" in his company. You can connect with Kris on Google+.

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Intuit’s $12B Mailchimp Purchase Breathes New Life Into Email Marketing

Intuit on Monday announced an agreement to acquire Mailchimp, a global customer engagement and marketing platform for small and mid-market businesses, for $12 billion in cash and stock advances. The purchase could be the linchpin that thrusts the mostly financial software company into solving more fertile mid-market business challenges for its customers.

The planned acquisition is part of Intuit’s mission to become an AI-driven expert platform. With the acquisition of Mailchimp, Intuit will accelerate two of its previously-shared strategic big bets: to become the center of small business growth and to disrupt the small business mid-market, said the company in its announcement.

Intuit’s acquisition of Mailchimp sends a great message to all entrepreneurs around the globe that venture capital is not always necessary, observed Michael Kawula, co-founder of CBA, a marketing agency for YouTube monetization. Mailchimp is a bootstrapped success story that has not raised any outside venture capital.

“This is a very clever growth strategy for Intuit, who wants to get in front of SMBs, which is difficult and expensive. Similar to HubSpot’s recent purchase of The Hustle newsletter, a much smaller acquisition, this also is brilliant,” he told the E-Commerce Times.

The acquisition marks a significant impact in industry, according to Osiris Parikh, sales marketing manager at Lilius. He also sees the deal as another reminder that email marketing is not dead — and data is power.

“Intuit has made a strong move to broaden its portfolio and become a leader in catering to the needs of SMBs. It is also a great story of success during Covid-19,” he told the E-Commerce Times.

Deal Basics

Intuit provides a global technology platform that makes TurboTax, QuickBooks, Mint, and Credit Karma. Intuit and Mailchimp will offer an innovative, end-to-end customer growth platform that allows customers to get their business online. It will also enable them to manage marketing, customer relationships, payment processes, and access insights and analytics, along with optimizing their cash flow and staying compliant with experts at their fingertips, according to Intuit.

Key to this process is Intuit’s ability to enable businesses to combine their customer data from Mailchimp and QuickBooks’ purchase data to get the actionable insights they need to grow and run their businesses with confidence.

“We’re focused on powering prosperity around the world for consumers and small businesses. Together, Mailchimp and QuickBooks will help solve small and mid-market businesses’ biggest barriers to growth, getting and retaining customers,” said Sasan Goodarzi, CEO of Intuit.

Mailchimp brings to Intuit technology at scale along with global customer reach.

Founded in Atlanta, in 2001, Mailchimp began by offering email marketing solutions. The company evolved into offering customer engagement and marketing automation processes fueled by an AI-driven technology stack. Mailchimp’s data and technology spans 70 billion contacts and more than 250 rich partner integrations. Its AI-powered automation at scale fuels 2.2 million daily predictions.

“Over the past two decades, we have vastly expanded and evolved Mailchimp’s platform to help millions of small businesses around the world start and grow,” said Ben Chestnut, CEO and co-founder of Mailchimp.

Why Mailchimp’s Worth It

While the email marketing sector is pretty crowded, Mailchimp stands out in terms of size and scope. The company reportedly has 13 million total global users, 2.4 million active monthly users, and 800,000 paid customers, noted Charles King, principal analyst at Pund-IT.

“Plus, half of its customers are outside of the U.S. Additionally, while people tend to focus on the mass/might of large enterprises, small businesses are really the heart and soul of most economies,” he told the E-Commerce Times.

The acquisition likely represents a lucrative opportunity for Intuit to integrate Mailchimp data with QuickBooks and provide greater analytical capabilities to customers. The synthesis of financial and marketing data in this case provides valuable and actionable insights about an organization’s clients, added Lilus’ Parikh.

“It’s also a great diversification of offerings to centralize SMB operations through one platform and benefit from Mailchimp’s established user base,” he said.

Another supporting factor for Intuit’s interest in Mailchimp is the renewed stature of email, according to Elice Max, co-owner of EMUCoupon and someone who has been involved in online marketing for eight years.

“Email marketing has made a comeback in recent years. With increased digitization caused by the pandemic, all digital mediums including email have gained a renewed importance,” she told the E-Commerce Times.

Email Marketing’s Resurgence

Technology giants are looking to build more integrated and holistic solutions. Microsoft recently bought Clipchamp, a video production tool. Both companies are looking to build platforms for the new tech-savvy SMBs, Max Suggested.

“More than anything, it means a renewed confidence in the field. Experts have been talking about the death of email marketing for a while now. But a $12 billion acquisition by a big player like Intuit means email promotion is alive and kicking,” she said.

Another factor is Intuit keeping its eye on the ball. It is important to remember the significance of Mailchimp as the pioneer in marketing automation and email marketing in particular.

“Intuit is looking to make a statement that it wants to become more than a financial software company,” Max observed.

QuickBooks Synergies

One of the motivations that lies behind Intuit’s purchase of Mailchimp is its desire to lead a revolution in the CRM capabilities of SMBs, according to Will Ward, CEO of Translation Equipment HQ . Think about the effect the pandemic has had on the popularity of remote work and the amount of remote SMBs being established.

“You would expect there to be a lot of growth potential here in the next few years. With Mailchimp and QuickBooks, Intuit is providing an end-to-end customer growth platform, and with around $20 billion invested already its belief in SMBs is evident,” Ward told the E-Commerce Times.

Like any other system that handles transactions such as orders and payments, you need to work closer to the actual customer channels. With the Intuit e-commerce product, launched about a year ago, this seems like a natural step by adding marketing automation and reaching out with its e-commerce offering to the MailChimp customer base, suggested Johan Liljeros, general manager and senior commerce advisor, North America for Avensia.

“The acquisition has added synergies between the platforms while still being able to operate as independent platforms. Looking at Intuit’s offerings, it appears they are moving towards expanding [into] digital transactional experience,” he told the E-Commerce Times.

Final Thoughts

Email marketers should be ready for disruption along with other business services providers. Intuit has been both savvy and aggressive in the way it built its business, effectively becoming the 800-pound gorilla of small business accounting and tax solutions, according to Pund-IT’s King.

“With that kind of ally behind Mailchimp, life is going to become a whole lot more ‘interesting’ for other email marketers,” he predicted.

The Intuit-Mailchimp deal should offer Intuit customers significant benefits, such as new solutions and services for bolstering their businesses. At the same time, the deal highlights the fact that old technologies can continue to be vital and dynamic.

“For years, many have claimed that email is dead or dying and quickly being replaced by whatever the tech du jour happens to be. Mailchimp — and now Intuit — beg to differ,” King quipped.

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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