DirecTV’s NFL Deal Jumps Sharply

DirecTV Inc. will triple what it pays to the National Football League starting next year to renew its exclusive rights to the “NFL Sunday Ticket” package of games, sources said.

The increase to $400 million through 2007 makes it one of the biggest increases in sports rights fees in recent years -- and threatens to saddle DirecTV with a money loser.

DirecTV and the NFL announced Wednesday that a deal had been reached but did not disclose the price. Sources said, however, that the large sum DirecTV is paying underscores the importance of sports to the leading satellite company as it battles both cable and satellite rivals.

It also highlights the negotiating prowess of the NFL, which has been more successful than any other sports league in extracting huge rate increases for its TV rights.

DirecTV executives say the deal will allow them to retain some of their most valued subscribers -- the ones willing to pay a premium for TV choices -- and also attract new customers.

They also contend that DirecTV can make a profit on the pact, even without raising subscriber prices more than they have in the past -- about 5% annually.

But analysis are skeptical. They say that based on current subscription rates and the 1.5 million customers for “NFL Sunday Ticket,” DirecTV stands to lose more than $100 million a year under the new contract.

DirecTV currently pays an average of $130 million a year for the package, which entitles subscribers to watch all of the league’s Sunday games for about $180 a season.

Cable operators have long coveted the NFL package, but industry officials say the NFL never seriously negotiated with them.

Instead, sources say, the NFL used EchoStar Communications Corp. as a stalking horse in the negotiations.

After federal regulators rejected a proposed merger of EchoStar and DirecTV parent Hughes Electronics Corp. in October, the NFL pit the nation’s two satellite competitors against each other.

EchoStar had never bid aggressively for sports rights, but DirecTV executives worried that its rival might do so this time. DirecTV also didn’t want to lose the marquee package at a time it is coming up for sale after the failed merger.

DirecTV has offered “NFL Sunday Ticket” exclusively since its inception in 1994.

Some sports fans complain that the exclusive contract makes these so-called out-of-market games unavailable to the TV masses. But DirecTV and the NFL portrayed the new agreement as a boon to viewers. As part of the new contract, DirecTV will launch a new NFL Channel on its basic satellite service next year that won’t feature games but will be entirely dedicated to football.

Although DirecTV will retain exclusive satellite rights to the package for five years, the NFL will be able to offer it to cable operators in 2005.

Fox and CBS -- which hold the rights to NFL Sunday games on broadcast TV -- prevented the NFL from taking the ticket package to cable before then because of the potential risk to their ratings. Networks see DirecTV as less of a threat than cable. That’s because the satellite leader reaches only about 10% of American TV households, while cable reaches 70%.

In addition, Fox’s parent, News Corp., was keen on keeping the NFL package intact at DirecTV, which it hopes to buy.