DirecTV (DTV), trying to broaden its audience, is cutting the price of its Sunday football package by about 40 percent for existing customers and offering it free to new customers for a year.
The largest U.S. satellite-TV provider said today it is dropping the price for the NFL Sunday Ticket package, which gives users access to all regular season National Football League out-of-market broadcasts, to $199.95 from about $325. Customers that also want access to the games on mobile devices will pay $299.95.
DirecTV has had the exclusive rights to out-of-market NFL games since 1994, one of its main assets against pay-TV rivals such as Comcast Corp. (CMCSA) and Dish Network Corp. (DISH) A promotion started last year that gave Sunday Ticket free to new customers for the season helped DirecTV add a net 327,000 U.S. subscribers in the third quarter -- the largest gain since 2009.
“Everyone is convinced they are getting squeezed on margins on all sides, so lowering the price isn’t going to help,” said Todd Mitchell, an analyst at Brean Murray Carret & Co. in New York, who has a buy rating on the stock. “I think that’s why the stock dropped.”
Charging an ‘Experiment’
DirecTV will again give Sunday Ticket at no extra charge to new subscribers for the season, although mobile access will now cost new customers $100.
“Charging for digital rights is an experiment,” DirecTV Chief Executive Officer Mike White said in an interview this month. “There aren’t great models in how you get your price elasticities right there. We’re all learning what will the market bear in terms of digital rights.”
Between 2 million and 3 million DirecTV customers subscribed to Sunday Ticket last year. The company has 19.9 million U.S. subscribers.
DirecTV is cutting back on discounted video packages to raise the average revenue it generates per subscriber. Programming costs will rise in the “high single digits” in 2012, Chief Financial Officer Pat Doyle said on the company’s fourth-quarter conference call.
The satellite-TV provider must come up with new ways of making its product appealing to convince customers not to switch to cable or Internet options such as Netflix Inc. (NFLX) or Hulu LLC, said Paul Sweeney, an analyst at Bloomberg Industries.
“I think this aggressive price promotion illustrates once again the competitive landscape of a mature industry,” said Sweeney. “NFL Sunday Ticket is a valuable arrow in DirecTV’s quiver.”
The NFL released its 2012-13 schedule on April 17.
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