No matter the fate of DirecTV-whether the government allows EchoStar's $24.6 billion acquisition from General Motors Corp. or determines it would create an anti-trust issue and the service somehow is sold to Mr. Murdoch's News Corp.-the NFL is akin to a happy armchair quarterback.
While the league can relax despite the sagging ad market since its lucrative deal with broadcast networks doesn't expire until 2005, it's preparing to launch a potential bidding war between DirecTV and the country's largest cable operators for the Sunday subscription package.
"They've got a property that's like gold right now for distributors," said an industry executive.
DirecTV pays the NFL an estimated $125 million annually for the rights to "NFL Sunday Ticket" in a deal that expires after the 2002 season. But in what could prove to be a watershed for fledgling digital cable services, cable operators hope to grab the package from DirecTV. One executive familiar with the situation said cable companies have told the NFL they're prepared to offer a "blank check." A spokesman for InDemand, a company owned by cable giants AT&T, Comcast, Time Warner and Cox that negotiates on their behalf for rights deals, said a deal would have to be financially responsible, but added: "One of our big goals has been to level the playing field with DirecTV."
No deal is expected until the future of DirecTV is decided. That could be up to a year away as the government reviews the matter. "We have every intention that we'll be able to keep our relationship with the NFL," said a DirecTV spokesman. An NFL spokesman said the league has made no decisions whether to re-up with DirecTV or launch a bidding war. Normally, DirecTV and the league would probably be in early stages of discussions. A call to EchoStar wasn't immediately returned.
Splitting the package between cable and DirecTV is unlikely since the NFL tries to avoid overexposure of games. Others say the NFL keeps a party sidelined to use it to drive prices up when the contract expires.
The NFL package has proved a boon for DirecTV; perhaps 12% of its 10 million-plus subscribers pay for the service. Digital cable could get a huge boost in subscribers if cable companies add the NFL package.
Until recently, it appeared as if News Corp. Chairman Murdoch would outduel EchoStar for DirecTV. Now, a spurned Mr. Murdoch could push the NFL into a deal with cable companies.
Under current contracts between Mr. Murdoch's Fox network and Viacom's CBS, which have broadcast rights to Sunday afternoon games, the NFL pays the networks a portion of its DirecTV deal. Additionally, the league is not allowed to offer the "Sunday Ticket" package to cable companies without approval of the two networks. A CBS spokeswoman had no comment; a call to Fox was not immediately returned.
Networks have been concerned DirecTV hurts their ratings and revenue opportunities for local affiliates. Mr. Murdoch and Viacom President-Chief Operating Officer Mel Karmazin-who both own cable networks and need to maintain good relations with operators-could urge the NFL into a deal with the cable companies, especially if they can extract more from the NFL for their bottom lines.