Here's why AT&T is trying to buy DirecTV

The news that AT&T had agreed to acquire DirecTV for a whopping $48.5 billion came as no surprise to observers of the pay-TV industry.

"If you think back to the ’90s the marketplace was full of small companies. We've seen wave after wave of mergers and now there are fewer and larger companies," says Jeff Kagan, an independent analyst. "Going forward were going to see even fewer and even larger competitors going forward or moving toward a national, competitive marketplace for television, telephone, Internet, wireless."

For AT&T, the deal is mainly about gaining scale in video and acquiring the bargaining power that comes with that to license premium content -- particularly with the looming specter of a tie-up between Comcast and Time Warner Cable. AT&T will combine its 5.7 million U-verse TV customers with DirecTV's roughly 20.3 million US subscribers.

"All of a sudden you're talking about the number-two pay-TV provider in the country," says Dan Rayburn, an analyst with Frost & Sullivan. "That means you can negotiate for better programming, and at a better price."

Having access to premium content is key to AT&T's ambition to become a major player in the world of streaming video. "DirecTV is way ahead of AT&T in terms of licensing deals. Something like NFL Sunday Ticket is a game-changer for AT&T if they can offer it as part of a package to their wireless customers," says Rayburn.

AT&T CEO Randall Stephenson said the deal will allow AT&T to offer premium video on all screens, from TVs to smartphones to cars and airplanes. Just how important is big-ticket content like the NFL? The deal terms actually stipulate that AT&T can walk away from the merger if DirecTV doesn't win the contract with the NFL to renew that exclusive.