DirecTV reconsiders ad hoc programming, NFL Sunday Ticket
Michelle Clancy | 28-11-2011
DirecTV, the largest satellite TV operator in the US, has decided to take precautions against unfavourable 2012 economic conditions by slashing programming costs.
Citing the European debt crisis and the upcoming presidential election as reasons for the move, the operator will take a new look at NFL Sunday Ticket and offer ad hoc packages allowing customers to choose their own packages of channels for which they can pay less than the all-in-one tier packages.
That in turn allows DirecTV to pay less for the expensive bundled-channel packages offered by content owners. This sort of ad hoc programming tactic not a popular move on the part of studios for obvious reasons, but increasingly pay-TV operators are demanding a way out of paying for channels that few people watch.
Meanwhile sports programming--something consumers are willing to pay a premium for--will be exempted from the scheme, allowing DirecTV to capitalise on upsell opportunities.
Speaking fo sports, NFL Sunday Ticket, the exclusive premium football package offered by DirecTV, is also coming under scrutiny. To wit: the operator managed to claim 327,000 net subscriber additions in the third quarter of 2011, but is not reaping an economic benefit. According to Zacks Investment Research, that's because the gains are attributable to a promotion for
"The company offered one-year free NFL ticket subscription for all its new customers, who opted for its two-year video contract," said Zacks in a research note. "DirecTV is bearing an estimated cost of $1 billion a year to broadcast this package. As a result, the company’s bottom line suffered in the previous quarter."
Strategic imperatives, like TV Everywhere, will remain on track. NFL Sunday Ticket is now available via Sony's PlayStation 3 videogame console, the iPhone/iPad and online.
"Pay-TV operators are facing serious threat from online video streaming service providers, such as Netflix Inc., Hulu.com, YouTube, and Amazon.com Inc. to name a few," wrote Zacks. "These online videos provide an extremely cheaper source of TV programming unless the customer is very eager to see real time programs like sports events. This business model is gaining momentum especially when the economy is under recessionary conditions."