DirecTV’s NFL Deal Is An Expensive Option For Exclusivity

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DirecTV (NASDAQ:DTV) is nearing an agreement to renew its exclusive deal with the National Football League. [1] The satellite company offers the popular NFL Sunday Ticket to its subscribers, a sports package that broadcasts National Football League regular season games that are not available on local affiliates. Aided by the NFL, DirecTV has managed to attract customers even at times when other pay-TV operators were losing subscribers. If the company succeeds in renewing the contract with the NFL, it will add to the overall subscriber growth for the company.

However, the cost of such exclusivity will remain high for the company. Earlier in 2009, the company renewed its agreement with NFL till 2014 for $4 billion. [2] Given the high costs involved for acquiring the programming rights, sharing the acquired rights may be helpful. DirecTV’s CFO has previously hinted on the possibility of sharing the NFL rights, if it makes economic sense to do so. [3] For the time being, we’ll be looking for an update on the agreement renewal. DirecTV CEO, Mike White, recently said, “We’ve had very constructive conversations with the NFL but it’s complex. I’m very optimistic we will get an exclusive deal done on NFL Sunday Ticket.” [1]

 

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NFL Sunday Ticket Is An Expensive Option For Exclusivity

NFL Sunday Ticket is a sports package that broadcasts National Football League (NFL) regular season games outside of their local markets on Sundays. In the U.S., the package is available exclusively to DirecTV subscribers, thus giving the company a unique edge and selling point. The NFL is one of the most popular domestic sports and maintains substantial viewership. It is consistently one of the most watched programs in the U.S.

DirecTV spends about $1 billion a year on NFL programming and charges up to $300 annually for the exclusive package subscribed by more than 2 million people. [1]The company would be earning around $600 million in revenues, which appear to be far less than the costs involved for NFL. The NFL Sunday Ticket has been one of the unique selling points for DirecTV, helping it gain subscribers in the past. Since the past few years the pay-TV subscribers have been increasing at an average annual rate of 4%. [2] Given the saturation in the U.S. pay-TV industry, the company risks a slowdown in subscriber additions if it opts for non-exclusivity. The renewal would thus help DirecTV in a time when its Latin America pay-TV growth has slowed, and the domestic competition has intensified with the rise of alternate video platforms such as Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN).

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Notes:
  1. Exclusive: NFL, DirecTV agree to framework for Sunday Ticket deal, Reuters, Dec 12, 2013 [] [] []
  2. DirecTV’s SEC Filings [] []
  3. DirecTV floats possibility of sharing NFL Sunday Ticket rights with cable operators, FierceCable, Mar 7 2013 []
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