Why DirecTV Needs to Fight for Football

PORTLAND, Ore. (TheStreet) –- DirecTV  (DTV) is just about worthless without NFL Sunday Ticket, which is why it needs to keep its football package nice and exclusive.

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, but DirecTV was able to parlay Sunday Ticket into a business-to-business service that saw its branded dishes and televisions installed at bars, restaurants and other locations where folks gathered to watch games.

Sunday Ticket was a great deal for everyone involved 20 years ago, when satellite television was a novel new way to reach 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 that the NFL could dabble in with help from DirecTV.

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Now, the Sunday Ticket deal is a lopsided arrangement. Approximately 2 million DirecTV subscribers, or 10% of the total, purchase 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.

Shockingly 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 currently offering. DirecTV Chief Financial Officer Pat Doyle said earlier 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.

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