DirecTV Rethinks NFL Sunday Ticket Deal Amid Cord-Cutting

Date : 09/27/2019 @ 5:22PM
Source : Dow Jones News
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DirecTV Rethinks NFL Sunday Ticket Deal Amid Cord-Cutting

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By Joe Flint 

The National Football League's Sunday Ticket package, which allows football fans to view almost any game, has long been a cornerstone of satellite broadcaster DirecTV, which holds exclusive rights to the offering.

But DirecTV-parent AT&T Inc. isn't sure it wants to renew the deal.

The company's chief operating officer, John Stankey, said he believes Sunday Ticket's value to the company has peaked and that a renewal -- especially if it comes with a higher price tag -- will be hard to justify at a time when consumers are canceling pay-TV connections, including at DirecTV.

"There's less profitability to support the decision" to offer Sunday Ticket, Mr. Stankey said in an interview earlier this week." "It becomes less critical to the business over time."

Any change may take some time. The current deal runs through the 2022 regular season and DirecTV pays an average annual rights fee of $1.5 billion, people familiar with the matter said. Still, it isn't unusual for sports rights negotiations to begin well before contracts expire.

DirecTV would be open to discuss sharing the package with other platforms. Typically, nonexclusive packages are far less costly. "We'd always look at it," Mr. Stankey said. "It all gets down to what the price of something is."

An NFL spokesman declined to comment. The league recently had an opportunity to exit from the DirecTV arrangement, but opted to maintain the current deal, a person familiar with the matter said.

The NFL carves up its rights across multiple TV networks and digital platforms. In addition to DirecTV, a number of TV networks including CBS, Fox, NBC and ESPN each have a portion of the league's schedule. Amazon.com Inc. streams Thursday night games, while Verizon Communications Inc. streams all in-market games and national games on mobile devices.

The Sunday Ticket package has been exclusive to DirecTV since 1994 and has allowed the satellite broadcaster to distinguish itself from rival pay-TV operators. Sunday Ticket customers can view all "out of market" games, meaning those televised outside their home market.

There are two Sunday Ticket offerings, one for $300 per season and another with more bells and whistles that costs $400. There is also an online offering for people who can verify that they can't receive satellite signals.

The cost of Sunday Ticket rights has risen dramatically. The current 8-year deal's average annual fee is a roughly 50% increase over the previous pact, which expired in 2014. DirecTV loses more than $500 million annually on the football package, people with knowledge of the deal said.

Mr. Stankey thinks the audience doesn't have much room to expand. "I don't think we look at that and say it's a growth product," he said. "I don't think we're going to wake up a year from now and suddenly there's going to be more people in the United States that want to watch an out-of-market team."

DirecTV doesn't disclose how many of its customers subscribe to Sunday Ticket, but people with familiar with the matter say there are around two million paying subscribers.

In a pay-TV industry where all distributors are struggling as consumers increasingly cut the cord in favor of streaming-video options, DirecTV has been going through particularly tough times. The satellite broadcaster has lost millions of subscribers over the past several years. In addition, programming costs continue to rise.

MoffettNathanson Research analyst Craig Moffett said while subscription fees for Sunday Ticket alone don't cover the cost of the NFL contract, there are other factors in evaluating its value to DirecTV.

DirecTV still earns healthy profit margins from Sunday Ticket subscribers as a whole, and many people only choose the satellite broadcaster because of the Sunday Ticket package.

"Lose the 'Ticket' and those customers will walk," Mr. Moffett said.

Write to Joe Flint at joe.flint@wsj.com

 

(END) Dow Jones Newswires

September 27, 2019 13:07 ET (17:07 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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