By acting too early, AT&T may have driven up the price on one of DIRECTV’s featured assets, NFL SUNDAY TICKET.
On May 18, AT&T announced it was purchasing DIRECTV for $48.5 billion. Unfortunately for AT&T, DIRECTV’s valuable contract for exclusive broadcasting rights to NFL SUNDAY TICKET, for which it paid approximately $1 billion per season, expires at the end of this year. DIRECTV and the NFL are currently negotiating an extension for the contract. On May 19, it was reported that AT&T can choose not to consummate the deal with DIRECTV if the satellite company fails to negotiate the extension with the NFL.
The NFL is the most popular sports league in America, making NFL SUNDAY TICKET an enormous asset for DIRECTV. With the news of AT&T’s option to essentially back out of the deal if DIRECTV doesn’t extend the NFL SUNDAY TICKET contract, the NFL has the leverage drive up the price. According to a report in the L.A. Times, industry observers anticipate the price tag on NFL SUNDAY TICKET could go up by 40% next season followed by 4% increases each year after.
By negotiating the DIRECTV buyout before the NFL contract extension is finalized, AT&T basically assured that DIRECTV will overpay for one of the last acquisitions it makes before the merger and therefore locked themselves into the bad contract. While DIRECTV may be negotiating the deal, the money to fulfill the bad contract will ultimately be paid by the soon-to-be-formed AT&T-DIRECTV conglomerate.
When you’re throwing around $48.5 billion, maybe paying a few million more for a known commodity doesn’t seem like a big deal, but then again waiting a few more months doesn’t seem like a big deal, either.
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