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DirecTV's next dilemma: Punting or keeping Sunday Ticket package

May 10, 2013|By Joe Flint
  • Will DirecTV pass on Sunday Ticket? Above, Redskins quarterback Robert Griffin III.
Will DirecTV pass on Sunday Ticket? Above, Redskins quarterback Robert… (AFP / Getty Images )

DirecTV is going to have to decide soon whether to punt or keep the football.

The satellite broadcaster's exclusive contract for rights to the National Football League's Sunday Ticket package, which offers subscribers access to every game being played on Sunday afternoon, ends after the 2014 season.

While that may seem like it is a long way off, typically the NFL likes to renegotiate its TV agreements a few years in advance of their expiration date. That was the case with ESPN, Fox, CBS and NBC, all of whom signed lengthy deals long before their current pacts expired. The NFL has managed to secure large rights fee increases from all the networks that carry it and will likely try to do the same with DirecTV.

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DirecTV currently pays roughly $1 billion per season for the Sunday Ticket package and about 2 million of its 20 million subscribers buy it at a price of $250 per season. That translates to $450 million in subscriber fees. DirecTV also pulls in additional revenue from its Sunday Ticket mobile package, which lets customers watch games on their phones.

To be sure, one can't look only at the subscriber fees Sunday Ticket generates to assess its importance to DirecTV's bottom line. Subscribers are also buying other packages from the service and hard-core sports fans might drop DirecTV if the NFL went away.

Sunday Ticket also serves as a valuable promotional tool for DirecTV. Last season, another tw2 million people got Sunday Ticket free just for signing up with the DirecTV, which clearly hopes that at least some of them will then decide to pay for it.

But even if the majority of those new customers don't opt to buy Sunday Ticket, the package still was a selling point to get them to try satellite TV and if they stick with it, then it is a win for DirecTV.

That doesn't mean that Sunday Ticket hasn't peaked in value though. On a conference call with analysts earlier this week, DirecTV Chief Executive Mike White declined to speculate about whether the company would try to keep Sunday Ticket, only saying "it is a pretty mature product."

Indeed, while cable bills continue to rise, the cost of Sunday Ticket for consumers has actually decreased from five years ago when DirecTV charged $250 per  season. 

There are several things for DirecTV to consider with regard to whether it should try to keep Sunday Ticket. For starters, because the NFL now is putting more games on Thursday night on its own NFL Network, that means there are fewer games available for Sunday Ticket. That alone seems to a reason to try to negotiate a lower fee to keep the service.

Furthermore, the NFL's own RedZone channel, which shows live coverage from all the games every Sunday, is growing in popularity and is another threat to DirecTV.

Should DirecTV decide Sunday Ticket is too expensive, it is unlikely that the NFL would probably shop it to cable operators. If Sunday Ticket was available to every pay-TV subscriber, Fox and CBS, which hold the Sunday afternoon rights, would not be happy. It's one thing for DirecTV to offer Sunday Ticket to 20 million homes and another for Time Warner Cable, Comcast and every other multichannel video program distributor to offer it to 100 million homes.

That could mean the NFL might finally consider a pay-per-view package for consumers who were interested in one particular team and willing to shell out a few hundred bucks to see every game.


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Follow Joe Flint on Twitter @JBFlint.


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