The Real Reason DirecTV Is Creating a Fantasy Football Channel

DirecTV will unveil a new fantasy football channel this season. What are the satellite TV provider's motives?

Jul 8, 2014 at 10:50AM
Nfl

June Rivera, Flickr.

DirecTV (NASDAQ:DTV) plans to unveil a fantasy football channel this NFL season, USA Today reports. Named "Fantasy Zone," the programming will be exclusive to NFL Sunday Ticket Max subscribers, in the same energetic style as its "Red Zone" channel. So why is DirecTV making the move? 

The obvious reason
Most pundits point to the creation of Fantasy Zone as evidence of fantasy football's rising popularity, and they're not wrong. According to the Fantasy Sports Trade Association, there are now 41 million fantasy sports participants in the U.S. and Canada, up 25% from 2010. Of that group, nearly three-quarters play fantasy football, and they typically spend $2 billion a year on related fees.

Given this growing demand, it's reasonable to think fans will watch televised fantasy content. But to this point, competitors like Yahoo!  and Disney's ESPN have only dabbled in live fantasy sports programming. That's the reason why DirecTV's new channel may work: It's groundbreaking, and it's as immersive as possible. 

Beginning next season, Fantasy Zone will fill fans' Sunday afternoons with "game-to-game fantasy analysis and statistics ... along with multiple, revolving on-screen tickers offering real-time stats, highlights, projections and key player updates," the network recently revealed. Cue Handel's "Hallelujah" Chorus. 

The not-so-obvious reason
But there may be a more interesting factor pushing DirecTV to create Fantasy Zone. Remember AT&T's (NYSE:T) nearly $50 billion acquisition of the network announced in May? As Forbes' Darren Heitner explains, the new channel may be indirectly linked to the deal. He writes:

The purchase is contingent on DirecTV maintaining its relationship with the NFL that allows the satellite television provider to continue offering its NFL Sunday Ticket package. The contract between DirecTV and the NFL ... is set to expire at the end of the 2014 NFL season and DirecTV has made it a priority to renew the deal. DirecTV's extended emphasis on football programming with the addition of a fantasy football channel creates added importance that an arrangement is made to maintain its relationship with the NFL.
In other words, the creation of the Fantasy Zone channel may convince the NFL to reup its expiring four-year, $4 billion deal with the network. This, in turn, would solidify the pending DirecTV-AT&T merger. Buried in the network's latest press release, in fact, is the disclosure that Fantasy Zone will be "powered by NFL.com." This connection is no coincidence, as the league would be smart to use DirecTV to promote its own fantasy game
 
The multi-million-dollar potential
Estimates suggest DirecTV had 2 million NFL Sunday Ticket subscribers on its books last year. Sunday Ticket Max, a higher-priced option, accounts for a portion of this figure. Because it includes Fantasy Zone, Red Zone, and mobile features, Max costs about $330 a year, while Sunday Ticket is nearly $100 less.
 
If fans take to Fantasy Zone -- both in terms of new subscribers and existing ones upselling from their existing ones -- DirecTV could generate millions in addition revenue.
 
The bottom line
While only time will tell if Fantasy Zone is a hit, the potential is significant. Given that the fantasy sports boom is in full swing, it doesn't take a genius to understand why DirecTV is developing the channel. The network's pending AT&T merger and its negotiations with the NFL are also worth keeping an eye on.

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Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Walt Disney and Yahoo. The Motley Fool owns shares of Walt Disney and Yahoo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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