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Is a Deal Extension between DIRECTV and NFL In the Cards?

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DIRECTV , the largest satellite TV operator in the U.S., is nearing to renew its existing contract for National Football League (NFL)’s “Sunday Ticket” package. According to a recent report by the Sport Business Journal, the two entities have settled for the extension of the deal which is continuing for the last 20 long years. DIRECTV currently carries a Zacks Rank #3 (Hold).

The agreement between DIRECTV and NFL over Sunday Ticket was first inked in 1994. The existing deal will come to an end in 2014 for which DIRECTV is paying $1 billion per year to NFL. According to the Sport Business Journal, the new agreement may extend for another 7-10 years and DIRCTV will pay around $1.3-$1.4 billion annually. However, neither DIRECTV nor NFL has confirmed the news.

NFL Sunday Ticket program acts as a major growth driver for DIRECTV, especially with regard to its average revenue per user. The package boasts approximately 2 million subscribers.

Meanwhile, in May 2014, DIRECTV reached a definitive agreement with AT&T Inc. (T - Free Report) to sell its business to the latter for $48.5 billion. The deal, which is expected to close within the next twelve months, now awaits the approvals of regulators. However, AT&T retains the right to call off the deal if DIRECTV fails to renew its contract with NFL.

In Jun 2014, DISH Network Corp. (DISH - Free Report) , the closest competitor of DIRECTV, revealed its intention to bid for the broadcasting rights of NFL’s Sunday matches if DIRECTV fails to renew its existing rights.

Notably, AT&T’s arch rival Verizon Communications Inc. (VZ - Free Report) also has an existing 4-year $1 billion per annum deal to stream NFL games for mobile phone users. This deal will continue till 2017. Meanwhile, if AT&T manages to attain the regulatory approval to acquire DIRECTV, then NFL’s agreement with either Verizon or AT&T may be reassessed.  

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