The blockbuster deal between AT&T and DirecTV proves one thing: that the National Football League Sunday Ticket package is the crown jewel in the satellite-TV provider's programming package.
DirecTV's relationship with the NFL and maintaining the Sunday Ticket package is critical enough to thethat it is deemed a deal breaker. If DirecTV doesn't renew its exclusive programming agreement with the NFL, AT&T has the option to walk away.
AT&T's buyout, which is expected to close within 12 months, creates a powerhouse for services in the home. It allows AT&T to pair its own wireless network with DirecTV's nationwide satellite TV service. The deal comes as AT&T faces slowing growth in its core wireless business and intense competition for its wireline service, a factor also at play in the proposed $45.2 billion merger between rival Comcast and Time Warner Cable.
The Sunday Ticket package, which allows subscribers to catch every out-of-market football game on Sunday, has long been a key driver of subscriber growth and loyalty at DirecTV. It also plays into AT&T's ambitions for its own nationwide video service, which it could bundle with broadband and wireless services.
DirecTV CEO Mike White, speakingearlier Monday, said he and AT&T CEO Randall Stephenson have talked to NFL Commissioner Roger Goodell about the merits of the deal, and said he was "highly confident" that he would be able to renew Sunday Ticket by the end of the year.
"If anything, it unlocks further opportunity for the NFL," White said.
But as BTIG analyst Richard Greenfield notes in a blog (registration required), there are a number of companies who could play the role of spoiler and snatch away exclusive NFL rights to those Sunday games. Here are four:
Comcast: If Comcast completes its merger with Time Warner Cable, it will have wider coverage suitable for Sunday Ticket. In areas where it isn't available, Comcast could use an online service or sign up partners such as Charter. Greenfield said Comcast's X1 video platform technology is superior to DirecTV.
"Acquiring exclusive control of DirecTV's most-prized content rights would deal DirecTV a devastating blow," he said.
Dish Network: Dish founder Charlie Ergen has been known to add a wrinkle or two to a deal. (See:.) What better way to stick it to a rival than to dismantle its merger with AT&T? Remember, AT&T was rumored to have looked at Dish as well.
Dish has also considered an over-the-top service, or video that would ride on the Internet like Netflix or Hulu, and Sunday Ticket would make for a nice draw, Greenfield said.
Verizon: Speaking of rivals, AT&T's archenemy could throw a wrench in things by going after Sunday Ticket itself. It's actually a deal that makes sense, as Verizon is already the marquee sponsor of the NFL and has exclusive mobile rights.
Verizon also has the technology in place, having bought Intel's scrapped online TV business, and boasting 5.3 million Fios TV customers.
"Sunday Ticket rights would put Verizon Wireless in a very unique content position and accelerate their OTT video strategy," Greenfield said.
Google: It's got a ton of cash, and isn't afraid to use it. Greenfield said Sunday Ticket could help YouTube get into the business of delivering video services in a serious way. It already has the infrastructure in place with YouTube given its existing focus on live events. The analyst noted that it's unclear whether the NFL would bet on a partner that was purely interested in an online-only strategy.
Based on White's comments, it's likely DirecTV and the NFL will come to terms on a renewal. The two have had a cozy relationship with years. But having AT&T in the fold changes the dynamics, giving the NFL access to mobile and broadband customers, creating an opportunity to truly take TV everywhere.
That has to give some of AT&T and DirecTV's rivals something to think about.