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updated: 8/22/2011 12:48 PM

Directv embraces web streaming with NFL Playstation offer

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Bloomberg News

DirecTV's decision to make its "Sunday Ticket" package available to Sony Corp. PlayStation 3 users may be the first step toward giving viewers access to out- of-market NFL games on a range of Web-enabled devices, a DirecTV executive said.

"If this test is successful, we have the opportunity to distribute 'Sunday Ticket' through various different devices, and we're certainly open to relationships with other consoles and Internet-connected devices," Alex Kaplan, senior director of sports marketing and product strategy for DirecTV, said in a telephone interview.

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DirecTV, the largest U.S. satellite-television provider, announced a partnership with Sony this week that allows PlayStation 3 users to stream as many as 14 games each Sunday. For non-DirecTV subscribers, the entire season costs $339.95 a year. It's the first time the company has made its exclusive National Football League rights available to non-subscribers on a non-mobile, television-connected device, enabling them to watch games on their high-definition TVs.

DirecTV, based in El Segundo, California, is migrating to providing Internet-connected viewing as more people choose online-video services. The top six U.S. publicly traded cable and satellite companies lost a record 580,000 video subscribers in the second quarter, according to data compiled by Bloomberg. DirecTV attracted 26,000 net new U.S. satellite subscribers during the period, the smallest number in 10 years, Bloomberg and company data show.

Changing World

Kaplan said his company is targeting viewers who, for various reasons, are unable to receive satellite TV.

"This product is designed for people who cannot get DirecTV," he said. "We're trying to maximize value for Sunday Ticket in a world where how people consume media is changing, and we want to be at the forefront of that."

DirecTV rose 54 cents, or 1.3 percent, to $42.47 at 1:16 p.m. New York time in Nasdaq Stock Market trading.

DirecTV started its "Sunday Ticket to Go" application to non-subscribers in 2008, allowing users to watch games on mobile devices for $350 a year. The company will take in almost $1 billion in revenue from Sunday Ticket subscriptions in 2011, according to James Ratcliffe, a New York-based analyst for Barclays Capital Inc. Current DirecTV subscribers pay about $330 for 'Sunday Ticket' through their satellite dish.

Internet-connected devices made by closely held Roku Inc., Apple Inc., Google Inc. and Microsoft Corp., including its video-game console Xbox 360, already allow video streaming from websites such as Netflix.com and Hulu.com. DirecTV CEO Michael White said earlier this month the company might consider acquiring Hulu, which has put itself up for sale.

If DirecTV is satisfied with the results of its PlayStation 3 partnership, the company could potentially pre-load Internet- connected televisions with its app, said Kaplan. Target audiences of the PlayStation partnership include residents in cities such as New York, where tall buildings prevent a clear signal for satellites, and video-game playing college students, he said.

"Getting the NFL to people who aren't DirecTV subscribers certainly helps to defray the costs of broadcasting the games," said analyst Matthew Harrigan at Wunderlich Securities in Denver. DirecTV is paying the NFL about $1 billion per season through 2014 for the rights to the games.

There's a risk the partnership with Tokyo-based Sony could cannibalize potential DirecTV satellite subscribers or lead to cancellations, Kaplan said. "Sunday Ticket" is one of DirecTV's primary promotional tools for new customer additions. As a result, the company is capping the number of PlayStation subscribers to test how the partnership will affect the satellite business, he said.

While marketing "Sunday Ticket" to non-DirecTV subscribers is a move away from satellite television, the goal is to turn PlayStation users into future DirecTV customers, said Kaplan.

"There are real revenue opportunities here from non- DirecTV customers, and while they won't sign up for DirecTV right away, ultimately these people could move to the suburbs, and we'll have a relationship with them that could lead to a conversion to DirecTV," said Kaplan.

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