DirecTV Calls NFL Broadband Play
And, based on how much DirecTV is believed to be paying for the renewal -- as much as $4.5 billion over the life of the contract -- it may need football-crazy cable customers to help pay the freight.
DirecTV has the exclusive on offering NFL Sunday Ticket via broadband starting no later than 2010. While that element might enhance a programming package that NFL fans have grown accustomed to, DirecTV did note that the Web TV version of the package will be offered to consumers who can't receive the company's satellite TV service. (See DirecTV Holds Football.)
In addition to extending the reach of the package, the broadband element could likewise loosen DirecTV's exclusive grip on Sunday Ticket, because it might enable cable and telco video subs, and perhaps even Dish Network LLC (Nasdaq: DISH) customers, to get their first taste of it.
As described by DirecTV, the deal's Web TV component covers customers who are unable to subscribe to the traditional DirecTV service because of apartment owner restrictions or line-of-site issues, but "in practice there appears to be nothing preventing DirecTV from offering the broadband NFL Sunday Ticket to anyone who wants it," noted Sanford C. Bernstein & Co. Inc. analyst Craig Moffett. "In effect, then, DirecTV has unbundled Ticket -- via broadband – from their core service."
But DirecTV controls those reins, and could set a "punitively" high price on the broadband offering to non-DirecTV subs. Regardless, DirecTV "may have created on over-the-top video problem for itself," Moffett said.
For DirecTV, that may not be such a bad thing, particularly if it finds that subscription growth on the package is running out of steam. It may in fact need cable and telco video subs to help subsidize the financial end of the deal.
Moffett estimates the new deal calls for DirecTV to pay in the range of $4 billion to $4.5 billion over the life of the four-year extension, or a little more than $1 billion per year. The current deal called for DirecTV to pay $3.5 billion over five years.
Moffett believes DirecTV will need to acquire 400,000 to 450,000 incremental football package subs by 2012 just to break even on the new contract. Moffett's model assumes a price increase from $300 to $350 by 2011 for the 2 million subs who currently take NFL Sunday Ticket.
But finding those incremental subs may prove difficult, because uptake among consumers who want the Sunday Ticket is likely to already be high, and the package's penetration among bars and restaurants is probably near saturation, Moffett said.
Broadband access is just one sweetener the NFL is mixing in. Starting no later than 2012, the league will also expand access to the "Red Zone Channel," a service that cuts into games during "crucial" moments and provides stats for fantasy football owners. That piece used to be exclusive to the DirecTV package, but the NFL now intends to offer the channel to all U.S. cable, telco, and satellite service providers, and distribute it to wireless and Internet-connected devices.
— Jeff Baumgartner, Site Editor, Cable Digital News