Another Sign the Internet Is Going to Kill DIRECTVhttp://www.fool.com/investing/general/2013/08/26/another-sign-the-internet-is-going-to-kill-directv.aspx Sam Mattera
August 26, 2013
Google (NASDAQ: GOOG) recently held informal talks with NFL executives about buying the rights to the NFL Sunday Ticket, according to AllThingsD. Satellite TV provider DIRECTV (NASDAQ: DTV) currently holds the rights, but its contract with the NFL expires in 2014.
If Google makes the deal, it would be yet another sign of DIRECTV's vulnerability to Internet-based alternatives.
NFL Sunday Ticket could change hands
The right to carry NFL Sunday Ticket does not come cheap. Right now, DIRECTV pays the NFL $1 billion per year for the priviledge -- a figure that's expected to increase once the current deal expires.
Google, with about $50 billion in the bank, definitely has the resources to make the deal. At the same time, DIRECTV's shareholders might not be sad to see it go -- analysts at Citi believe that the deal costs DIRECTV some $300 million each year.
Google could make better use of Sunday Ticket
The Chromecast, like its rival Apple TV, acts as a way to beam Internet content to a user's TV set. By paring the Chromecast with the NFL, Google would bolster its TV efforts.
But more than that, it's actually better positioned to offer NFL Sunday Ticket.
It wouldn't be unreasonable to assume that there are NFL fans out there that would be interested in such a package, but can't buy it because they aren't DIRECTV subscribers. Perhaps they've signed a contract with their local cable company, or find that bundling the Internet with cable makes more sense than buying DIRECTV.
By freeing NFL Sunday Ticket from a provider -- and offering it up to anyone with an Internet connection -- it should be able to attract more subscribers. Should that occur, it will be yet another example of content moving online.
The rise of Internet-based providers
Without seeing the service in action, it's difficult to predict that it will be a success. Yet, if it's popular, Intel could stand to make a lot of money. For example, last quarter, DIRECTV brought in $7.7 billion in revenue, largely from its base of 20 million US subscribers. For comparison, Intel took in $12.8 billion in revenue last quarter.
Obviously, even if Intel's service is fantastic, it isn't going to get 20 million subscribers overnight. But longer-term, paid TV could become a meaningful contributor to Intel's business.
DIRECTV as a value trap
Yet, the potential long-term ramifications of paid-TV's move to the Internet could be catastrophic. Unlike a rival such as Comcast or Time Warner Cable