AT&T announced on Sunday a deal to acquire DirecTV, the nation's largest satellite television provider, for $48.5 billion in cash and stock. The deal still has to pass muster with federal regulators before it can be completed. It also hinges on another powerful media provider, the NFL and the exclusive Sunday Ticket package offered by DirecTV.
The National Football League's current contract for the popular subscription package with the satellite provider lapses after the 2014 season. No new deal would allow AT&T to back out of its deal with DirecTV. It's spelled out in the fine print of the deal.
DirecTV's CEO expressed confidence on Monday morning that his company would renew its deal with the NFL.
DirecTV CEO Mike White reiterates confidence that NFL Sunday Ticket deal will get done. It better, fine print lets AT&T out if no renewal.— Joe Flint (@JBFlint) May 19, 2014
The NFL and DirecTV agreed on a four-year, $4 billion renewal for the Sunday Ticket package in 2009. That deal upped what the satellite company paid from $700 million to $1 billion per year, foreshadowing the increases in the league's more recent deals with broadcast networks.
Sunday Ticket is currently offered exclusively on DirecTV, a major selling point for luring new subscribers and it also keeps broadcast affiliates from competing for ratings with local cable providers. However, that deal did include a wider distribution for the league's RedZone channel and allowed subscribers in some markets where satellite service wasn't available to purchase the package through a cable provider.
Subscribers currently pay $300 per season for the Sunday Ticket package, which gives them access to all Sunday afternoon out-of-market games. Approximately 2 million DirecTV subscribers, or 10 percent, purchase the Sunday Ticket package.
The potential of a new Sunday Ticket deal has already raised questions about exclusivity and changes to the current one. Early indications from industry reporters suggest that DirecTV will retain exclusivity in a new deal with the NFL.
DirecTV and the NFL were in talks to renew the Sunday Ticket deal prior to the AT&T purchase. The current cost of the deal was one issue in negotiations. DirecTV CFO Patrick Doyle suggested in February of this year that if the NFL's asking price for the rights to the package were to climb much higher, the company would have to consider dropping the service or finding another company to shoulder the load. Enter AT&T.
Other questions remain as the deal moves forward. For instance, will AT&T offer Sunday Ticket to its current base of approximately 5 million U-verse subscribers? AT&T hasn't specified plans for a renewed NFL package.
The deal also raises questions about an online service for watching NFL games. Last year, an online subscription to Sunday Ticket was included in a special edition of EA's Madden video game. And while AT&T's cable service reaches a relatively small number of households, it's the nation's second-largest wireless service provider, behind Verizon, with nearly 110 million subscribers in the United States. Verizon currently offers the RedZone channel through its partnership with the NFL. Sunday Ticket subscribers were able to get games on mobile platforms through the app (because how could you forget Peyton and Eli Manning pitching that with the "football on your phone" ads).
AT&T told its shareholders on Sunday that the deal to acquire DirecTV "provides numerous growth opportunities." A new deal with the NFL already looks like it's a big part of that promise.