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Is a Deal Extension between DIRECTV and NFL In the Cards?

Zacks Equity Research

DIRECTV (DTV), the largest satellite TV operator in the U.S., is nearing to renew its existing contract for National Football League (:NFL)’s “Sunday Ticket” package. According to a recent report by the Sport Business Journal, the two entities have settled for the extension of the deal which is continuing for the last 20 long years. DIRECTV currently carries a Zacks Rank #3 (Hold).

The agreement between DIRECTV and NFL over Sunday Ticket was first inked in 1994. The existing deal will come to an end in 2014 for which DIRECTV is paying $1 billion per year to NFL. According to the Sport Business Journal, the new agreement may extend for another 7-10 years and DIRCTV will pay around $1.3-$1.4 billion annually. However, neither DIRECTV nor NFL has confirmed the news.

NFL Sunday Ticket program acts as a major growth driver for DIRECTV, especially with regard to its average revenue per user. The package boasts approximately 2 million subscribers.

Meanwhile, in May 2014, DIRECTV reached a definitive agreement with AT&T Inc. (T) to sell its business to the latter for $48.5 billion. The deal, which is expected to close within the next twelve months, now awaits the approvals of regulators. However, AT&T retains the right to call off the deal if DIRECTV fails to renew its contract with NFL.

In Jun 2014, DISH Network Corp. (DISH), the closest competitor of DIRECTV, revealed its intention to bid for the broadcasting rights of NFL’s Sunday matches if DIRECTV fails to renew its existing rights.

Notably, AT&T’s arch rival Verizon Communications Inc. (VZ) also has an existing 4-year $1 billion per annum deal to stream NFL games for mobile phone users. This deal will continue till 2017. Meanwhile, if AT&T manages to attain the regulatory approval to acquire DIRECTV, then NFL’s agreement with either Verizon or AT&T may be reassessed.  

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