DirecTV Extends NFL Broadcasting Deal

DirecTV and the NFL have announced an extension of the exclusive NFL Sunday Ticket package through 2014, but one analyst isn't sure the deal is worth it.
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Updated from 12:39 p.m. EDT

DirecTV

(DTV)

said late Monday that it has extended its exclusive agreement with the National Football League for rights to broadcast games through the 2014 season.

The exclusive deal between the NFL and DirecTV for NFL Sunday Ticket, an out-of-market package that debuted in 1994 and is one of DirecTV's major selling points, was set to expire at the end of the 2010 NFL season. While financial terms of the extension were not announced,

The Associated Press

reported that the value of the deal is $1 billion annually, citing people close to the situation.

In 2004, DirecTV had spent $3.5 billion in order to extend the agreement with the NFL for five additional years, or $700 million annually.

Craig Moffett, a research analyst with Sanford Bernstein, said the deal lifts a significant risk from DirecTV shares, but it comes at high cost as the contract price has ramped up over the years.

"More broadly, the escalating cost of the NFL Sunday Ticket illustrates the strategic dilemma facing DirecTV," he wrote in a research note Tuesday. "The upside of renewal is now relatively limited, since the largest part of the potential audience presumably already subscribes. But the potential loss had they not renewed the contract would have been enormous."

Assuming price increases for current NFL Sunday Ticket subscribers as well as other subscription revenue, Moffett says that DirecTV would need to acquire or retain about 400,000 to 450,000 incremental subscribers by 2012 "who are solely attributable to the NFL Sunday Ticket package in order to break even on the contract."

The NFL also said it will offer the NFL Sunday Ticket package to fans who cannot receive DirecTV service via broadband, with the service expected to launch no later than 2012.

Additionally, the NFL said it will offer fans who cannot receive DirecTV service the "Red Zone Channel," which cuts to crucial scoring situations for Sunday afternoon games, through cable, telco and satellite systems, wireless devices, and the Internet. The new offering will come no later than 2012, the league said.

"In effect, then, DirecTV has unbundled the Ticket -- via broadband -- from their core service," Moffett wrote. "This raises questions as to whether or not the Sunday Ticket package is really still exclusive."

DirecTV also has extended its carriage agreement with NFL Network, which airs football-related content 24 hours a day, seven days a week on a year-round basis.

Shares of DirecTV slid 52 cents, or 2.2%, to close Tuesday at $22.93. Rival

Dish Network

(DISH) - Get Report

gained 1.2% to $11.46.

Sirius XM

(SIRI) - Get Report

, which has audio broadcasts of NFL games, was up 8.2% to 35 cents.