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DirecTV May Deal Another Blow to the Reeling NFL

Last Updated October 3, 2020 7:56 AM
Ian Bezek
Last Updated October 3, 2020 7:56 AM

The NFL has had a rough couple of years. The sport’s rising injury toll is generating a ton of headlines this year, including superstar Andrew Luck’s shocking retirement at such a young age. You had the Colin Kaepernick controversy and all the politics around kneeling. And now it appears that these issues are coming home to roost financially.

The Wall Street Journal reported  Friday that AT&T’s DirecTV service is considering dropping the NFL Sunday Ticket from its lineup once the current contract expires in 2022. DirecTV has long relied on Sunday Ticket to drive subscriptions. It allows fans to watch almost any NFL game live. This is an indispensable feature for fans that live far from their favorite teams and can’t watch those games on the major broadcast networks.

DirecTV Taking Massive Losses

The WSJ article reported that DirecTV is losing something close to half a billion dollars a year on its football deal. That’s some pretty hefty losses. Overall, DirecTV pays $1.5 billion annually for the exclusive rights.

This is part of a bigger problem for AT&T. The company is now one of the world’s most indebted companies  following costly acquisitions of Mexican mobile phone networks, DirecTV, and most recently Time Warner. Investors are getting frustrated. Earlier this month, activist fund Elliott Management took a stake in AT&T stock and demanded  massive changes to the company.

Elliott wants management to stop acquiring more stuff and instead get rid of struggling businesses. AT&T may need to jettison DirecTV before its value plummets even more as customers cut the cord. That said, AT&T stock may work out alright, especially if Elliott gets its way; our Kiril Nikolaev made the case for buying AT&T stock recently even as streaming rivals like Netflix are getting pounded.

NFL at Peak Revenues

While AT&T may figure out some profitable exit from DirecTV, it’s all downhill from here for the NFL. Wells Fargo’s analysts estimated that the NFL brought in more than $8 billion in media rights last year. That far eclipsed all other sports. By comparison, the NBA garnered $3 billion, and professional baseball brought in less than $2 billion.

So, the NFL has the most to lose from cord-cutting, with a sizable chunk of that $8 billion potentially disappearing once the current DirecTV deal expires. It’s also terrible news as the NFL’s narrative. The league has claimed that TV viewership is still going strong even while attendance at NFL games is hitting its lowest levels  since 2011. Given the headwinds, the league’s highly paid players should consider investing their fortunes now while they can still pull in megabucks.