According to AllThingsD, Google (GOOG 0.41%) is having informal conversations with NFL representatives regarding the possibility of buying the rights to NFL's Sunday Ticket package. It's still too early to tell if a deal with ultimately go through, but it sounds like a smart move which could be a game changer for the company and the future of TV.
Deep pockets
The NFL Sunday Ticket package, an exclusive out-of-market package that allows viewers to watch nearly every game on the NFL schedule on Sundays, is currently owned by DIRECTV (DTV +0.00%). But that contract is set to expire at the end of 2014, so the NFL has started talking with potential bidders, and Google seems to be interested in that discussion.
AllThingsD reports that Google CEO Larry Page and YouTube content boss Robert Kyncl met with a delegation from the NFL led by commissioner Roger Goodell to discuss the possibility of buying the rights to Sunday Ticket package among other things.
DIRECTV has held the rights to Sunday Ticket since the league introduced the package in 1994. The satellite TV company is currently paying $1 billion per year , and management has stated that they would be willing to consider a nonexclusive deal if the price for renewal becomes too high.
Sunday Night Ticket is a key differentiator for DIRECTV, but at the same time it's a money loser on a stand-alone basis since it has nearly 2 million subscribers paying between $200 and $300 per year. DIRECTV is facing lackluster subscriber growth in the U.S. lately, and the company is putting profitability over expansion in its home market, so it needs to keeps costs under control.
DIRECTV paid a 40% increase for the last renewal, and the NFL has obtained big increases with other partners like CBS, Fox, and NBC, so it will be looking for a material raise in this case, too.
Especially in the context of a bidding war, prices may become too steep for DIRECTV, and maybe a nonexclusive deal would provide a convenient alternative for both Google and DIRECTV to have the rights to Sunday Night Ticket for a reasonable cost.
In any case, Google has much deeper pockets than DIRECTV. If the company is willing to pay the price, it can certainly afford to do outbid the competition.
Google and the future of TV
Major tech companies like Google, Apple, and Microsoft are actively competing against each other over the future of TV with different devices bringing the Internet and apps to the living room, while others like Netflix and Amazon are more focused on the content side of the equation.
TV is the new battleground in the tech war, and a deal with the NFL could put Google in a position of remarkable strength to fight this battle on several fronts at the same time.
The company has not achieved much success with Google TV, but the recently launched Chromecast -- a $35 dongle that plugs directly into TV sets and streams video and other digital content from mobile devices -- has received mostly positives critiques so far.
A deal with NFL would most likely lose money for Google, especially if the company pays full price for exclusivity. But it would also give the company the possibility to become a major player on the content side of the online TV business.
YouTube is a formidable platform with more than 1 billion unique visitors per month , and Google has recently started experimenting with a paid YouTube subscription service. A deal like this one could give the company instant access to one of the most valuable programming assets in the US, and it could be a real game changer for both Google and online TV if the company continues adding valuable content over time.
This would show viewers that they have viable alternative to cable plans in online streaming, including not only movies and TV shows but also widely coveted sports. Having Sunday Ticket on YouTube could provide the encouragement for many people to finally cut the cord with traditional cable companies, providing a big push for online TV in general and YouTube in particular.
Foolish bottom line
Google is one of the most innovative and disruptive companies around, and products like Android, Chrome, and YouTube have proven over time that the company knows how to put long-term strategic considerations above short-term profit margins.
Acquiring the rights to Sunday Ticket package would provide access to an enormously valuable property in the battle for the living room.
Couple that with the huge popularity YouTube already has in free content, the long term potential of Google Fiber and the recently launched Chromecast, and things could become quite interesting when it comes to Google and the future of TV.
Even if Google doesn't manage to close this deal, the fact that it's going for it says a lot about the lon- term vision of its management team. Google is betting on the future of TV on multiple fronts at the same time and the company is not afraid of making big investments to secure its position in a key strategic area with huge potential over years to come. This is already good news for Google shareholders.
