DirecTV rethinks NFL Sunday Ticket Deal

Discussion in 'DIRECTV Programming' started by the2130, Sep 27, 2019.

  1. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

    49,497
    1,778
    Apr 17, 2003
    Michiana
    $2680 for new commercial customers, 51-100 fire code occupancy. $3500 for renewing customers. The top rate is just over $220k for 10,000 occupancy/casinos. A "small bar" with four receivers or less and 1-100 occupancy can pay $900.
     
  2. the2130

    the2130 Active Member

    666
    77
    Dec 17, 2014
    So if DirecTV is getting about $600 million in sales to individuals and they are losing $500 million per year on the NFLST, that would mean sales to commercial accounts are something like $400 million per year. Does that seem like a reasonable estimate?
     
  3. B. Shoe

    B. Shoe Mentor

    217
    76
    Apr 3, 2008
    Illinois
    I only see the NFL opening this up to other services, as long as they still make more money by the total sum of all distributors. Open it up to, say, three companies, each paying 60% of what Directv paid in one sum. NFL still comes out ahead.

    You make an interesting point; what's the target dollar amount for the package that seems "reasonable" to an average consumer? Or at least a price point that would say, add 100K new subs to Sunday Ticket, that might be turned away by the current cost?
     
  4. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

    49,497
    1,778
    Apr 17, 2003
    Michiana
    The problem is that DIRECTV is paying a rate that is not based on the number of paid subscriptions. If the NFL opens up ST to other providers the rate will become based on the number of subscribers. (It is very unlikely that the NFL would get paid a flat rate from each provider regardless of the number of paid subscribers.) The NFL may expect $1 billion from DIRECTV (based on what DIRECTV is collecting today). But the reality is some of those DIRECTV subscribers will move to other services and pay through the other services. DIRECTV isn't going to want to pay $1 billion for less paid subscribers than they have today. That would mean they would be continuing to take a loss on the service but not getting the benefit.
     
    SamC and B. Shoe like this.
  5. SamC

    SamC Hall Of Fame

    2,360
    137
    Jan 20, 2003
    This is exactly correct. In a non-exclusive model, it is much more a basic retail scenario. It is unlikely, IMHO, that a particular provider would pay much of anything upfront to the NFL. Rather they would charge a set price and split the proceeds with the NFL.

    Look at it like a retail store. Today Store D is the ONLY way to buy a widget. And, to buy widgets, you must buy all of your other groceries from Store D. So Store D pays the widget maker a massive over payment for the exclusive right to sell widgets, knowing it will make it back on the profit from other items it sells. Tomorrow, any store can sell widgets. So every store, including Store D, pays a fair price for widgets and marks them up to make a small profit on every widget sale, just as it does with every other item. The result is less money for the widget maker.
     
  6. slice1900

    slice1900 Well-Known Member

    10,535
    1,495
    Feb 14, 2013
    Iowa
    I'm sure the end of the flat rate deal with guaranteed income is why the NFL has left the current agreement in place so long, and didn't exercise the option to end the current contract earlier. If they drop the exclusive, Directv will want to insist on the NFL charging a certain price per subscriber because they lose the benefit of the flat rate allowing them to use NFLST as a freebie for customer acquisition/retention. So those of you who are getting it for free don't want to see the deal end, because you won't get it free from AT&T or anyone else if the exclusive ends.

    The NFL has no way of knowing if they'd make more money under that scenario, it is a risky move. Maybe AT&T refusing to give them another increase will be the thing that makes them decide to take the plunge. Getting an increase each time probably makes it easier to take the bird in the hand instead of beating the bushes hoping to find two.

    I don't see any reason why AT&T wouldn't want to keep NFLST if they had to pay per customer. Then instead of losing $500 million a year it would be profitable (i.e. whatever markup they put on top of what they have to pay the NFL) and of course all the freebies would end. They'd lose out from subscribers who were only with Directv for NFLST leaving, so they'd have some losses but would they lose $500 million worth of customers? They probably think that's about the yearly profit of the customers who would leave - because they said they wouldn't pay MORE than the current price for NFLST to extend the exclusive post-2022, which sounds like they'd be OK paying the same and continuing to "lose" $500 million a year on it.
     
  7. the2130

    the2130 Active Member

    666
    77
    Dec 17, 2014
    There was a followup article in Forbes about this:

    If DirecTV Drops NFL Sunday Ticket, Will Subscribers Scramble?

    Note the following from the article:

    "The NFL "has (made) no secret it wishes to split the rights between the satellite carrier and a different distributor, whether streaming or cable," The Athletic said."
     
  8. techguy88

    techguy88 Active Member

    414
    156
    Mar 19, 2015
    The way I see this whole thing with the NFL Sunday Ticket (from the NFL opt-out to AT&T's comments) is both sides are at an impasse on what they want to do going forward after 2022.

    NFL would like to expand availability but at the same time they don't want to lose that $1.5 billion/year they get for the package which is why they didn't opt out of their current deal. AT&T doesn't want to pay more than the $1.5 billion/year for just D* exclusivity. They also don't want two separate distribution deals for their multiple video products for NFL Network hence why they are willing to migrate U-Verse TV subs to D* just for NFL Network.

    I can see AT&T paying more if the deal was altered to something like this:
    -Carriage of the NFL Network on DirecTV, U-Verse TV, AT&T TV and AT&T TV Now
    -Carriage of NFL's version of RedZone on U-Verse TV and AT&T TV Now
    -NFL Sunday Ticket on DirecTV and AT&T TV

    This would essentially bring NFL under 1 contract for all AT&T video services, allow D* to contintue to be the only "traditional" MVPD to have NFL ST while AT&T TV would be the exclusive streaming home.

    As long as AT&T doesn't give new AT&T TV subscribers the first season of NFL ST for free like they do with D* it won't cannibalize D* new subscriber sales. It also won't encourage existing D* to cancel their satellite service and switch to the AT&T TV service just to get the NFL ST for free.

    For their expensive AT&T TV streaming service this would give it that one edge that no other streaming service has and if they want it to be their true parallel with D* then this would be it. For customers who have cable like Xfinity, Spectrum, etc. that want NFL Sunday Ticket but don't want a satellite dish period this could be a key to get them to switch to AT&T TV and subscribe to NFL Sunday Ticket.

    But as long as the deal is just pertaining to D* I doubt AT&T will pay more than what they are currently paying.
     
  9. the2130

    the2130 Active Member

    666
    77
    Dec 17, 2014
    The NFL knows it is reaching only a fraction of the potential market for out-of market games with the current deal. In order to bring in more money, more subscribers are needed. A separate streaming package for cord-cutters is needed at a minimum, and it would make sense to expand the package to other pay-TV companies as well.

    When NFLST originated in 1994, it was exclusive to DTV and C-band because most cable companies didn't have the capacity to carry it at the time. The NFL dropped C-band in the early 2000s because of the declining number of large dish users, leaving DirecTV with exclusive rights.

    The NFL intended for the package to go non-exclusive after the 2005 season. The contract between DirecTV and the NFL that covered the 2003 to 2007 seasons called for 3 years of exclusive rights and 2 years of non-exclusive rights, at a cost of $400 million per season. In 2005, the final year of non-exclusive rights under that contract, DirecTV negotiated a new deal that kept the package exclusive by increasing the rights fee to $700 million per season. Since then they have increased the rights fee every time the contract has gotten close to expiration in order to keep it exclusive.

    What AT&T is signalling now is that they can't continue to pay ever-higher rights fees in the face of a declining pool of subscribers to sell to. And they also realize there are limits to what people will pay for the package. Which is why this is the first time in several years they haven't increased the subscription price. Something has to change.
     
  10. slice1900

    slice1900 Well-Known Member

    10,535
    1,495
    Feb 14, 2013
    Iowa
    Most cord cutters are not sports fans - even if you have an antenna there is a ton of stuff on ESPN you can't legally get via streaming (I don't consider going to Youtube TV as "cord cutting" it is still the same old MVPD packages just delivered differently)

    So I'm not convinced there is a big untapped market of cord cutters who would pay hundreds of dollars for NFLST. There probably is a big untapped market of non-Directv MVPD subscribers who would pay for it. The question is how many. The superfans who are willing to pay the highest price for it chose Directv specifically because that's the only way they can get it. The people who could subscribe to Directv but chose Dish, cable or Sling/Youtube/etc. and want NFLST probably aren't willing to pay as much for it.

    So if the NFL is able to double the subscribers from the 2 million estimated/claimed for Directv to 4 million by making it available to everyone but those extra 2 million people are only willing to pay $200 instead of $300 they'll lose money. Currently they get $1.5 billion from Directv, who loses $500 million on it so Directv is actually collecting $1 billion. 2 million people at $300 each is $600 million, so we can guess commercial is $400 million.

    If there are 4 million subscribers at $200 each that's $800 million, plus the $400 million commercial is $1.2 billion or a $300 million loss. Even if they tripled their subscriber base and got 6 million subscribers for a total of $1.2 billion, which added to the $400 million commercial is $1.6 billion that's probably not enough - because that's the gross revenue the distributors are getting. The NFL isn't getting that - if they got $200 per head the cable/satellite/streaming companies would have to charge more than that just to pay their costs, and would further mark it up so they had some profit on it. So the NFL may only be able to collect $150 per head if the customers are paying $200. Which means they have to QUADRUPLE subscribers at $200/each ($150/each to the NFL) to make more than they are making currently.

    So this isn't as simple of a decision/process as some people want to think. Just because there are Dish, cable and streaming customers who would pay for NFLST doesn't mean the NFL is adding that revenue to the $1.5 billion flat rate Directv pays them. Directv will insist on paying per head and a MFN clause to insure someone else isn't getting a better deal. Which means that $1.5 billion might be only $500 million after all is said and done - even if they keep commercial as an exclusive which is possible, since many or most of the 'captive' NFLST subscribers may go elsewhere when people can get it anywhere. So the NFL has to make at least $1 billion from everyone else.
     
    SamC likes this.
  11. SamC

    SamC Hall Of Fame

    2,360
    137
    Jan 20, 2003
    I agree.

    First, yes, so-called “cord cutters” are a self-selected lot. The primary reason they cite is “to save money” and the only way to save money is avoiding live sports and the high cost there of.

    Second, DirecTV subscribers are likewise a self-selected lot. For many access to NFLST is a primary motivation.

    And these two things correlate to one another. I don’t think there is this large mass of people staring dumbly at their cord cut TV too stupid to call 1800DIRECTV and get NFLST if they wanted it.

    And third, this remains a niche product. We already get for “free” at least 6 of the maximum 16 games played each week, with the other 10 being played at the same time. A vastly different situation from any other sport’s pay per season package. And most people only have one TV to watch at a time. With the advent of the Red Zone channel and the end of the home team blackout policy, we are left with super fans, geographically illogical fans and their first cousins the borderland fans (markets like Columbus, Shreveport or Tri-Cites, where different teams, often playing at the same time on the same network, could be the ‘local’ team), and gamblers.
     
  12. B. Shoe

    B. Shoe Mentor

    217
    76
    Apr 3, 2008
    Illinois
    That, or they are already viewing NFL games it through not so legal means (ie: Jailbroken streaming devices, Reddit streams, etc.) and now have no intent to ever pay for it, regardless of cost.

    I've said this to several of my friends. As much as I enjoy Sunday Ticket, I feel it provides the least dollar-for-dollar value of any sports subscription package. None of the other pro sports subscriptions cost over $170 for the season, and you can watch those leagues every night. It's a little bit of apples to oranges, I understand, given the nature of football. But what's the baseline for what a customer would normally be willing to spend on NFLST? We've seen numerous people on these boards that make the discount call, receive the equivalent of what could be 30-50% off the cost in credits, and still turn it down. Is $200 a fair cost for the common viewer?
     
  13. techguy88

    techguy88 Active Member

    414
    156
    Mar 19, 2015
    The thing is if AT&T wants it AT&T will buy it. AT&T however wants all of its programming contracts for all its video products to be under 1 singular contract. Both AT&T and NFL have stated the current NFL Sunday Ticket deal they are handicapped as independent DirecTV locked this contract down to DirecTV the satellite service back in 2014-15.

    This means AT&T can't use this contract to add NFL Network back to U-Verse and AT&T TV Now without breaking it. NFL can't break out the streaming rights without breaking it and neither side apparently wants to do that for the current contract otherwise NFL would have used their opt-out before this season started if they could have made more than $1.5 billion/year.

    AT&T is essentially saying they are not going to pay anymore than $1.5 billion/year for a product that is completely exclusive to DirecTV. They never said they wouldn't pay more in general.

    For example AT&T would potentially pay more to keep the exclusive rights within AT&T itself if the deal was potentially structured like this:
    -NFL Network available on DirecTV, U-Verse TV, AT&T TV, AT&T TV Now (and any future video product they decide to create)
    -NFL's version of RedZone available on U-Verse TV and/or AT&T TV Now
    -NFL Sunday Ticket available on DirecTV (traditional MVPD)
    -NFL Sunday Ticket available on AT&T TV or AT&T TV Now (streaming MVPD)

    Essentially AT&T has a streaming product to meet the NFL's needs and if AT&T thinks by having the exclusive streaming rights for Sunday Ticket would help boost AT&T TV Now or AT&T TV and if the NFL is willing to work with AT&T on both the traditional MVPD and streaming fronts then of course AT&T will pay more for it.

    However if the NFL is only willing to renew the deal as is AT&T is essentially saying we will not pay more than $1.5 billion/year for exclusive rights on DirecTV only. AT&T doesn't see the value in having the NFL Sunday Ticket exclusive to just DirecTV anymore with its high cost.
     
  14. Rob37

    Rob37 Active Member

    746
    97
    Jul 10, 2013
    Absolutely. Why Not?
     
  15. TheRatPatrol

    TheRatPatrol Hall Of Fame

    8,202
    556
    Oct 1, 2003
    Phoenix, AZ
    So from what techguy88 is saying it sounds like AT&T couldn’t offer a streaming package now because the current contract doesn’t allow for it?
     
  16. the2130

    the2130 Active Member

    666
    77
    Dec 17, 2014
    Correct. They can't even offer NFLST to AT&T U-Verse cable customers at this time.
     
  17. the2130

    the2130 Active Member

    666
    77
    Dec 17, 2014
    Regarding the comments above about sports fans not being cord-cutters, is there any data to support that?
     
  18. inkahauts

    inkahauts Well-Known Member

    24,580
    1,425
    Nov 13, 2006
    Seems right. Local home teams get theirs on their local station over the air.
     
  19. the2130

    the2130 Active Member

    666
    77
    Dec 17, 2014
    The skinny bundles offered by YouTube, Hulu, and others are designed for cord-cutters who want live sports, along with local channels and some of the other stuff available in traditional Pay TV packages. You can get ESPN, RSNs, FS1, CBSSN, NBCSN, and just about everything else sports fans would want EXCEPT FOR NFL SUNDAY TICKET.

    I'm not a cord-cutter, but if I were I could sign up for Hulu + Live TV and get most of what I watch, including live sports. And since I already have the ad-free Hulu service, I would only pay about $38 per month more to add the Live TV. That's a big savings over what I pay for DirecTV. The one thing I couldn't get is NFLST, which is the main reason I'm not even considering it.

    The cord-cutter market is growing fast and the NFL knows it is missing a significant segment of the market by not having a separate streaming package, which is why that is likely to change with the next contract.
     

Share This Page

spam firewall