The NFL Needs to Punt Sunday Ticket Away From DirecTV

PORTLAND, Ore. (TheStreet) -- The NFL is a $10 billion business with just one obstacle standing between it and a bigger payday: DirecTV's NFL Sunday Ticket.

There is absolutely no reason the league should continue to give DirecTV exclusive rights to one of its most potentially lucrative television properties -- especially with so many other options at its disposal.

DirecTV is in the final year of a deal with the National Football League that paid the league $1 billion per season for the rights to its NFL Sunday Ticket package that includes all out-of-market games, a channel of stats and scores, a mix channel featuring up to eight games at once, a channel that cuts games down to their most-essential 30 minutes, the RedZone channel of scoring drives and a fantasy football channel. The service also allows customers to stream games through their computer or mobile device, depending on the package a customer purchases.

Since 1994, DirecTV has had sole access to NFL Sunday Ticket and held onto it as other sports leagues developed out-of-town subscription packages of their own. Major League Baseball, The National Basketball Association, The National Hockey League and even Major League Soccer now offer such packages through various cable, satellite, Internet and wireless providers and allow fans to stream those games to any device they wish.

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This was a great agreement 20 years ago when widely available satellite television was a technological frontier and an exciting way to reach new audiences. The NFL could give DirecTV rights to Sunday Ticket for as little as $700,000 a year and just watch the ratings pile up. It wasn't even such a bad option in 2009, when mobile technology and streaming were still fairly new concepts the NFL could dabble in with help from DirecTV.

Now, the Sunday Ticket deal is a lopsided arrangement. Approximately 2 million DirecTV subscribers, or 10% of the total, buy either the $240-a-year basic Sunday Ticket package or the $330-a-year Max package. Meanwhile, according to media research firm SNL Kagan, 80 million customers subscribe to cable or satellite providers that aren't DirecTV. Even if only 10% of that audience subscribed to NFL Sunday Ticket, it would quadruple DirecTV's Sunday Ticket subscriber base.

But that assumes the NFL would want to expand into a shrinking industry. As SNL Kagan reported this year, cable and satellite subscriptions fell for the first time in 2013. Cable and satellite providers lost 251,000 subscribers last year. Though research firm IHS notes that DirecTV and Verizon actually gained subscribers in 2010, other cable and satellite customers lost more than 2 million customers combined.

The NFL has already placated other cable and satellite partners including Dish Network, Verizon, AT&T U-Verse, Cox and Cablevision by offering a version of Sunday Ticket's RedZone Channel on their systems and giving them access to the NFL Network. But it just nullified much of the NFL Network's value by taking $275 million from CBS to broadcast former NFL Network property Thursday Night Football this season.

Another option for the NFL comes from Internet partners who have almost as much pull as DirecTV's cable and satellite competitors combined. According to the the Commerce Department's National Telecommunications and Information Administration, 72.4% of U.S. households (88 million) have high-speed Internet access. A 10% share of that audience alone would give Sunday Ticket nearly 9 million subscribers and give the NFL nearly five times the reach of its current deal with DirecTV.

There's also the not-so-small possibility that the NFL takes Sunday Ticket mobile. It already has a $5-a-month live streaming deal with Verizon customers, who have exclusive access through the NFL Mobile app. It also has no qualms allowing DirecTV to sell Sunday Ticket as a mobile streaming package for the same $330-a-year cost of its premium Max service -- without the burden of a two-year satellite subscription. According to the Pew Research Internet Project, 56% of Americans have smartphones and represent the broad potential audience for the NFL and its proud partners at Verizon -- which already has a whopping 110 million subscribers of its own.

DirecTV doesn't seem to care what the NFL does from here: As long as the satellite provider doesn't have to pay more than $1 billion a year for what it's offering. DirecTV Chief Financial Officer Pat Doyle said this year that he would rather share Sunday Ticket with cable or even drop it all together to prevent paying double the asking price. Then again, his company is getting squeezed by ESPN, Fox Sports and others for subscriber fees that keep jacking up the costs of service.

AT&T's $48.5 billion bid for DirecTV changed that stance a bit. Not only would AT&T's 11.3 million U-Verse cable customers likely join the Sunday Ticket mix, but its second-in-the-U.S. mobile offerings (more than 60 million subscribers) could give the service a larger, multiplatform home. That deal is heavily contingent upon the league renewing DirecTV's NFL Sunday Ticket deal, though. DirecTV's been optimistic about that prospect and has continued negotiating, but there's been no definitive word from the NFL about its prospects.

Meanwhile, Google has emerged as an outside contender for Sunday Ticket rights. Though the NFL continues to work with Microsoft and Verizon on its online and mobile options, Peter Kafka at All Things D says that Google and its video providers at YouTube have been in talks with the NFL about how to make an all-streaming Sunday Ticket a reality. That move would not only continue Sunday Ticket's tradition of helping the NFL embrace and explore new technology, but would give the league a partner with deeper pockets than DirecTV ever had. Google would also give the NFL the run of an ecosystm that includes YouTube, Android-powered mobile devices, Chromebooks and even Google Glass.

Last fall, the NFL drew 205 million unique viewers in 81% of U.S. television homes. The 17.6 million fans it drew per regular-season game is more than Major League Baseball draws for the World Series or what the National Basketball Association brings in for its finals.

Overall, Fox, CBS and NBC pay the NFL $28 billion -- or roughly $1 billion a year -- for broadcast rights through 2022. ESPN pays $1.9 billion each year -- or more than double what any network pays for a season of Major League Baseball -- just to host Monday Night Football. Meanwhile, the networks are more than happy to cough up the money, as 34 of the 35 most-watched television shows in the fall of 2013 were NFL games.

The NFL can get far more than $1 billion a year for its NFL Sunday Ticket package. Tethering it exclusively to DirecTV at this stage is just a bad game plan.

-- Written by Jason Notte in Portland, Ore.

>To contact the writer of this article, click here: Jason Notte.

>To follow the writer on Twitter, go to http://twitter.com/notteham.

>To submit a news tip, send an email to: tips@thestreet.com.

-- Written by Jason Notte in Portland, Ore.

>To contact the writer of this article, click here: Jason Notte.

>To follow the writer on Twitter, go to http://twitter.com/notteham.

>To submit a news tip, send an email to: tips@thestreet.com.

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Jason Notte is a reporter for TheStreet. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, the Boston Herald, the Boston Phoenix, the Metro newspaper and the Colorado Springs Independent. He previously served as the political and global affairs editor for Metro U.S., layout editor for Boston Now, assistant news editor for the Herald News of West Paterson, N.J., editor of Go Out! Magazine in Hoboken, N.J., and copy editor and lifestyle editor at the Jersey Journal in Jersey City, N.J.

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