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Should DirecTV Charge More For Sunday Ticket?

Thursday, 4 Aug 2011 | 9:41 AM ET
Direct TV
CNBC.com
Direct TV

It's something you'd never hear from a NFL fan, but I've certainly heard from more than a few DirecTV investors: Why doesn't DirecTV charge more for its Sunday Ticket package?

At $350 for the standard package or it's for its to go problem, the price has increased almost 30 percent since 2006. But compare that to the in-stadium product. I've been told that $350 is the about the average price that an NFL season ticket holder pays (when including his or her PSL per game) for one game.

Analysts seem to give the company the benefit of the doubt on its pricing strategy.

Craig Moffett, senior analyst at Sanford C. Bernstein, estimates that only 10 percent of DirecTV's customers have Sunday Ticket. And it's only a money maker, he says, in the sense that many of those people choose DirecTV over its competition because of the exclusive rights to the NFL games.

The greater value therefore isn't derived from the a la carte cost of the package itself, but from the fact that new customers spend more on the entire programming package because of it. That's the main reason why DirecTV is currently offering Sunday Ticket for free if someone switches from a competitor.

"The free Sunday Ticket package has a value of call it $350," Moffett said. "But the rest of the programming package is typically for an average customer about $85 per month so you'll quickly burn through the value of the Sunday ticket package in your regular programming bill."

Moffett also says pushing the price much further. Add the free network and cable games and then Red Zone, which shows as many of the league's plays in the red zone and you can see the Sunday Ticket is not necessarily a high-end mass appeal item.

"My guess is you wont see very big increases in the NFL Sunday Ticket going forward," Moffett said.

Thursday's earnings proved that the company's future growth isn't on Sunday Ticket or in the US, for that matter. DirecTV added 472,000 net subscribers in Latin America last quarter and only added 26,000 net subscribers in the US, about half of what analysts expected.

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