Could DirecTV and the NFL's happy relationship finally come to a disastrous end? It can if the two don't come to an agreement on the price that it will cost DirecTV for NFL Sunday Ticket.
During the earnings conference call for the second quarter, DirecTV CEO Michael White spoke about the current negotiations with the NFL. Their contract with the league ends after the 2014 season, so the satellite company still has a small amount of time left.
We're always in a dialogue with the NFL about how things are going and how we can continue to improve and build the franchise, and we've had those discussions as well this year. We continue to have very constructive discussions with the NFL. I continue to be optimistic that we're great partners together and that Sunday Ticket will stay with us for the long haul.
It's all about the price that the NFL would like to increase the deal to. As it stands, DirecTV shells out just over $1 billion for the Sunday Ticket package each year, giving them exclusive rights over the subscription, not counting the Web access. That's quite a lot of money, but it secures DirecTV as the only provider of this content. The company's CFO Patrick Doyle seems to agree with his statements back in March that DirecTV won't pay an exponentially higher price for the package.
For us, there's a point where we're certainly willing to renew and at some increase that's reasonable, that we can absorb and continue to pass on to the customer. I think, obviously, if it goes above that, we would certainly either think about not carrying it or go nonexclusive.
DirecTV has had exclusive access to broadcast Sunday Ticket since its inception back in 1994. However the NFL is putting pressure on upping the price of its media deals across the board. CBS, NBC, FOX and ESPN, altogether, have averaged a price increase of just over 75 percent for their renegotiated contracts, so if you carry that over to DirecTV, that send the current $1 billion price tag to $1.75 billion. Is that a hike that the satellite company would be willing to pay? If not, I'm sure any cable company would be quick to swoop in and try to work out a short-term deal immediately. However, with the amount of added incentives that DirecTV offers, like watching on your tablet, computer and even adding your fantasy football team into the Sunday Ticket interface itself, I think it would take a lot more work than what it's worth for cable providers, especially considering some of them balked for years at even introducing the NFL RedZone channel. It's also possible that DirecTV would consider signing a non-exclusive deal if it meant a sharp discount in price.
In contrast, Aereo is currently expanding their reach. By only having to pay $8 a month with no contract commitment, if Aereo is in your favorite team's market, that's a far better price to pay for five months than the $300 sticker shock that is Sunday Ticket - or having to sign a one- or two-year agreement with DirecTV.
Could Aereo be damaging DirecTV's value of Sunday Ticket to the point where they could no longer justify paying the price tag? Let us know your thoughts in the comments section below.