In a strategic decision, DIRECTV (DTV), the largest satellite TV service provider in the U.S., has decided to stream its NFL (National Football League) Sunday Ticket TV package on the Internet. The company is trying to expand the viewership of football games by broadcasting it online. Subscribers can now watch NFL matches via Sony Corp.’s (SNE) PlayStation 3 videogame console, laptops/PCs, and other high-end mobile devices such as Apple Inc.’s (AAPL) iPhone.
The existing DIRECTV subscribers need to pay $50 per annum extra to get this streaming facility. Non-subscribers of DIRECTV can also enjoy this facility by paying $340 per annum. NFL Sunday Ticket is an in-demand TV package in the U.S. and is one of the most prestigious premier-tier programs offered by DIRECTV. The company will incur an estimated cost of $1 billion a year to broadcast this package. According to management, its recent decision is an attempt to squeeze maximum revenue from NFL Sunday Ticket from 2011-2014, for which the company has broadcast rights.
We believe streaming TV packages is a logical conclusion on the part of pay TV operators to address the growing competitive threat from online video streaming service providers, such as Netflix Inc. (NFLX), Hulu.com, YouTube, Amazon.com Inc. (AMZN) to name a few. These online videos provide an extremely cheap source of TV programming unless the customer is very eager to see real time programs like sports events. This business model is gaining momentum especially when the economy is in a recession.
Although DIRECTV added net 26,000 subscribers in the U.S. in the second quarter of 2011, this figure was actually miles behind the prior-year quarter’s net addition of 100,000 subscribers and net addition of 184,000 subscribers in the first quarter of 2011.
At present, DIRECTV has around 2 million NFL Sunday Ticket subscribers. This TV program also becomes a weapon for the company to gain customers from bigger cable TV operators, such as Comcast Corp. (CMCSA) and Time Warner Cable Inc. (TWC). DIRECTV is offering the NFL Sunday Ticket free to all its new subscribers who switch over from its rivals.
