NFL could be the ticket for cable: Ergen could fumble satellite's exclusive game package

Cable World, Nov 12, 2001 by Paul Kagan

You know it's a great football season when the Chicago Bears, Cleveland Browns and Pittsburgh Steelers are winning. But the NFL isn't just Sunday in the park with Eddie George. It may hold the key to the next showdown between cable and satellite forces. Just as EchoStar and DirecTV complete their proposed merger, late in 2002, club owners could decide to spread their formation and move their famed NFL Ticket from satellite to cable.

The 13-game card every Sunday, at only $159 (or less when it's on sale), costs the rabid viewer only 72 cents a game. It has helped bring DirecTV more than 20% of its 10 mil. subscribers and would be an extra feather in the cap of the daring Charlie Ergen, the only player on the broadband field without exclusive branded content. But even as EchoStar gets past government scrutiny of its Deep Dish concept (not guaranteed, but probable), it may be tackled by the NFL.

For six years the football league has kept exposure of its megagame package limited to DirecTV's universe, lest it offend the broadcast networks and their huge rights fee payments. But CBS/FOX/ABC/ESPN--who bet $18 bil. on NFL rights from 1998-2005--are locked in for four more years, and it's not likely they'll up the ante when the NFL invites them to the 2002 review. That could mark the kickoff for cable operators and networks to go for the elite package. They'll have players and agents on their side, lobbying for greater increases in the salary caps.

And club owners wouldn't mind effectively selling a new franchise without having to share the proceeds with an extra team.

Cable's best ally in its quest for the Sunday gridiron orgy could be EchoStar itself. Ergenomics is a frugal media operating philosophy practiced originally by Tom Murphy & Dan Burke at Capital Cities Broadcasting, later by John Malone at TCI and Liberty and now by the industry's newest superhero, the Dishman of Denver. The logical key to the DBS future is to create scale, drive down the cost of programming, pass along lower prices to viewers and usurp cable as the low-cost provider of home entertainment. That won't get NFL players a hefty raise, but it might get cable the NFL Ticket.

One way cable could sweeten the pot: offer subsets of the Ticket on its growing number of VOD and SVOD options make an aggressive move on a huge, untapped potential revenue stream: interactive football, giving fans at home a chance to call the plays in competition with the coaches. It worked like a charm from 1992-94 but the venture went dormant in those Credit Crunch years, before ITV gave way to the Internet. ITV could have a tailgate party if the NFL goes looking for a new revenue stream.

Analyst Paul Kagan is an active investor and money manager and often owns securities mentioned in his columns. He may buy or sell before and after his columns are published, and his positions may change at any time. Information in his columns does not represent a recommendation to buy or sell securities, nor is it a solicitation of any securities transaction. Kagan is vice-chairman of Primedia Ventures, an affiliate of the owner of Cable World.