SAN FRANCISCO — There are approximately 316 million people in the United States, and on weekends in the fall it seems as if every one of them is a fan of the National Football League.
All hyperbole aside, the NFL is the most popular sporting league in the country. Want proof? An estimated 111.5 million people watched the Seattle Seahawks dismantle the Denver Broncos 43-8 in Super Bowl XLVIII in February, making the game the most-watched program in American history. There’s a reason that, even in this age of fractured TV viewing and Internet-based programming options, Super Bowl advertisers paid a reported $4 million for a 30-second spot during the game.
(Full disclosure: I am a Seattle native and diehard Seahawks fan, and the ‘Hawks victory ranks among the four happiest days of my life.)
The NFL is event television. TV networks know this, and it’s why they pay billions of dollars to broadcast NFL games. The NFL also, in a way, knows it has a captive audience. If you are a Verizon Wireless customer, you can subscribe to NFL Mobile and watch games on your smartphone, but not everyone is a Verizon customer. And the league doesn’t offer a streaming video option like that of Major League Baseball, the National Hockey League or the National Basketball Association that lets you watch out-of-market games on your TV for a monthly fee.
But, if you subscribe to DirecTV DTV and pay $240 or $330 for six months, you can watch your hometown team no matter where you live, and from the comfort of your living room, thanks to the satellite TV provider’s NFL Sunday Ticket package. No other national TV provider offers this option to football-mad fans, and DirectTV knows that. Approximately 2 million of DirecTV’s more than 20 million US customers subscribe to Sunday Ticket, and it’s been a source of major income for the company. That’s why DirecTV paid an estimated $4 billion to the NFL for the latest Sunday Ticket contract.
That programming could in fact be viewed as one of the gems AT&T Inc. was seeking with its pursuit of DirecTV — which concluded in a takeover deal announced Sunday worth $67.1 billion. In fact, if the Sunday Ticket arrangement, which expires at the end of the upcoming NFL season, were not to be extended, AT&T would reportedly have a legal out, according to terms of the takeover.
AT&T has about 5.5 million subscribers to its U-Verse TV service. Adding DirecTV could bring AT&T’s TV subscriber base to around 26 million customers. And with those subscribers all around the country, some analysts say it’s feasible AT&T could position itself as the new de facto national NFL “network.”
“Nobody else is going to buy that Sunday Ticket package,” said Adam Ilkowitz of Nomura Equity Research, who added that the next deal with the NFL will easily be in excess of DirecTV’s current $4 billion contract. “There’s no other national provider who can offer this option. That’s why DirecTV did it. They can serve any customer.”
While the contract for Sunday Ticket will come up for negotiation, Ilkowitz said it doesn’t make sense for other TV providers to engage in a bidding war, as even cable giant Comcast CMCSA doesn’t have the reach across the entire country that AT&T boasts.
“For AT&T to acquire DirecTV, the strategic rationale would have to include items like cost synergies, savings, etc.,” Ilkowitz said. “And Sunday Ticket has been something to attract people for them.”
Not everyone is a fan of the AT&T-DirecTV team-up, though.
Topher Morrison, managing director of Entrevo, a consulting firm, isn’t sold on AT&T’s buying DirecTV, calling the planned acquisition a disaster in the making. “They have this model of buy everything, control everything, and that no longer works,” Morrison said. “They will eventually guy a bunch of junk that nobody wants, and DirecTV might just be the first sign of that junk.”
However, even Morrison said that “If DirecTV has any asset at all, it’s the specialty niche with the NFL. You have a provider there that is offering you what you want, and AT&T may see the asset value in that.”
It used to be that no one ever got fired for buying IBM. Likewise, it’s doubtful anyone ever lost money betting on the growth of the NFL. If AT&T ends up completing its acquisition of DirecTV, keeping that Sunday Ticket package in the DirecTV fold, it might well have placed the right bet on the right team at the right time.
This article was originally posted on Marketwatch.com.