DirecTV continues to plug away at a deal that would allow it to retain the exclusive rights to the NFL Sunday Ticket package, but the satellite-TV giant said it has yet to finalize an agreement with the league.
Speaking to investors during the company’s fourth quarter earnings call Thursday, DirecTV chairman and CEO Mike White said the negotiations began to pick up steam after the NFL season officially ended on Feb 2.
“Obviously, things tend to get pushed to the side…but now that we’re through the Super Bowl we’ve both agreed to extend our exclusive negotiating period,” White said. “Our conversations with the NFL are progressing in a very positive and constructive manner.”
White added that he continues to be very optimistic that DirecTV will hold onto the rights to Sunday Ticket, for which it pays $1 billion per season. DirecTV has been the exclusive distribution partner of the out-of-market package since the NFL first rolled it out back in 1994.
DirecTV’s current agreement expires at the end of the 2014 NFL campaign.
White hinted that the digital rights component of the new agreement may have complicated the negotiations, before adding that he hopes to have more to say on the matter later this year.
“In every discussion that we have on any content, digital rights are an important part of those discussions, and frankly that’s often partly why things take a little longer these days to get done,” White said. “Because it’s an awfully complex digital landscape in deciding exactly what rights a content provider will or won’t provide you.
“But from our perspective, we’re optimistic. We very much value our relationship with the NFL, we think it’s important to our brand—but we’re also looking for opportunities, as we did last year, to strengthen what we’re doing in a smaller way with our DirecTV app and the Sunday Ticket Experience.”
Last year, DirecTV chief financial officer Patrick Doyle suggested that the NFL’s asking price for the Sunday Ticket package was too steep, noting that if the price went much higher, the operator would consider sharing the load with a third party carrier or dropping the service altogether.
Although a number of outlets in December reported that a deal had been reached, the NFL was quick to refute those claims. But as long as the exclusive negotiating window remains propped open, Sunday Ticket is DirecTV’s to lose.
Both parties have been negotiating on and off since before the 2013 NFL season began.
However the talks pan out, Sunday Ticket is a loss leader. Approximately 10 percent of DirecTV’s sub base, or 2 million customers, pay the annual $300 fee for the all-inclusive football package. That said, Sunday Ticket gives the satellite company a huge advantage over its MVPD rivals in an increasingly NFL-crazed consumer landscape.
Still, the absolute value of Sunday Ticket has somewhat eroded over the past few years. For one thing, the NFL’s newly revised full-season Thursday Night Football schedule has incrementally boosted the odds of finding your favorite out-of-market team on a national TV platform; moreover, the rise of the look-in service NFL RedZone offers a fast-paced, commercial-free experience rivaling that of its much pricier forebear.
Because sports rights are the priciest ticket in the MVPD ecosystem, White also talked a little baseball. The DirecTV boss said that talks between his company and Time Warner Cable’s new Los Angeles Dodgers network have been stymied by the startup’s unprecedentedly high sub fee.
“Look, I’d like to carry the Dodgers, but unfortunately Time Warner Cable has done an unprecedented deal for local sports rights. I mean, the Dodgers channel is over double what the average regional sports network charges per customer per game—and by the way, all the other [regional sports networks] have at least one other pro team,” White said. “So it’s a staggering increase relative to any other benchmark in Major League Baseball.”
White said that he hopes to come to terms with the RSN, but the price will have to come down sharply before an agreement can be reached.
Insiders say SportsNet LA is looking to secure the highest affiliate fee for any extant RSN, north of $4.75 per subscriber per month. That fee, which gets passed down to the customer, is the primary reason why the RSN has not been able to secure carriage on DirecTV and Cox Communications.
Noting that DirecTV would be forced to charge “more than an average increase in our surcharge” in the Los Angeles area should it decide to carry SportsNet LA, White said that this kind of sudden billing increase “is what drives people to want to see a la carte.”
SportsNet LA is set to go live on Feb. 25.
In a non-sports-related interval, White fielded a question about how parting ways with the Weather Channel had impacted DirecTV’s sub count. “I would say we may have lost a few thousand customers in the first quarter related to the Weather Channel dispute,” he said, before qualifying his estimate with the observation that a price increase had gone into effect at the same time the two entities were falling out.
Citing lower ratings and a plethora of available alternatives, DirecTV dropped the Weather Channel from its lineup in mid-January.
“I continue to believe that if your viewership goes down materially or customers are finding other ways to access that content…that should be reflected in the price that one pays for a service,” White said. “The impact on our U.S. business? It’s a little early to say.”