DirecTV's Zeal for Football Cools -- WSJ
By Joe Flint
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 28, 2019).
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 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
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
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
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
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
Write to Joe Flint at email@example.com
(END) Dow Jones Newswires
September 28, 2019 02:47 ET (06:47 GMT)
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