Forget the federal regulators—it’s actually NFL commissioner Roger Goodell who could have final say in whether AT&T’s proposed $48.5 billion acquisition of DirecTV comes to pass.
AT&T is trying to swallow up the satellite television provider to get access to its 20 million U.S. subscribers, large international footprint and healthy cash flow. But those American customers may start jumping ship if DirecTV fails to keep hold of its most valuable exclusive property, the National Football League’s all-you-can-watch Sunday Ticket package. DirecTV’s contract with the NFL for Sunday Ticket, which offers live coverage of every out-of-market game each Sunday, expires at the end of next season. In an SEC filing, AT&T revealed that if the deal is not renewed, it reserves the right to back out of the merger. DirecTV won’t be on the hook to pay AT&T damages for the botched deal as long as the company uses “reasonable best efforts” to woo the NFL.
For now, the merging companies say NFL negotiations are on the right track. On a conference call with investors Monday morning, DirecTV CEO Mike White said both he and AT&T CEO Randall Stephenson had already talked to Goodell and that negotiations for NFL Sunday Ticket should be completed by the end of the year. “I am still highly confident that we are going to get our deal done," he said.
DirecTV pays about $1 billion per year for Sunday Ticket, which has around 2 million subscribers. The fact that football has been placed at the crux of this mega-merger will give Goodell significant leverage to ask for even more money at the negotiating table. The cost for Sunday Ticket could rise by as much as 40 percent to $1.4 billion, according to the Los Angeles Times.