AT&T and DirectTV merger

I am puzzled by the recent news about the possible merger of AT&T and DirectTV. My conversations with colleagues didn't quite erase my doubts that this, roughly $50 billion deal doesn't make sense. There are no obvious technological synergies. While AT&T will gain some 20 million satellite subscribers, it will not be able to integrate this customer base with its own (roughly 5 million) video customers. So no real gain in terms of scale either. On the operations side, again, not clear whether costs can be taken out of the combined system. Five times more customers will make it easier to negotiate content deals but does this marginal impact justify the huge financial transaction and associated management challenges? It is not clear. VOD is a big and growing business. It is also clear that consolidation is needed as the landscape is quite fragmented. But this particular combination doesn't strike me as the right one.

Rating agencies

Here is an update on the state of the ratings industry. Phenomenally different and, yet, phenomenally the same as three years ago (this blog had plenty of entries about CRAs during the crisis)! It is different because the CRAs are doing well - really well actually.... It is the same because the industry still consists of a select trio of firms who have all the market share together with the 'well-documented' bad incentives in creating biased ratings on pretty much all the economy. The real difference is that we are not in a crisis but in a boom so no-one cares. Yet the flawed structure and framework of the ratings industry has been left in place and will produce the same controversies in the next downturn as it did in the last.