Courtesy Wall Street Journal

(March 24, 2009) In a sign that media rights for major sports may defy the recession, the National Football League reached a four-year extension with DirecTV Group Inc. Monday valued at $4 billion.

According to a person with knowledge of the deal, the contract calls for payments of $1 billion a year for the 2011-14 seasons. That is a 43% increase on an annual basis over the current five-year deal, in which DirecTV pays the NFL about $700 million a year for the exclusive right to sell the Sunday Ticket package. That package allows fans to see every NFL game on Sundays, as opposed to simply the games shown on local broadcast channels.

Major cable operators have been trying to reach a deal with the NFL to sell the Sunday Ticket and share revenue with the league, but the NFL has preferred to take a lump-sum payment from DirecTV, which has used the product to lure viewers away from cable subscriptions to satellite.

However, the new deal chips away at DirecTV's exclusivity when it comes to out-of-market games. The agreement with the El Segundo, Calif., company allows the NFL for the first time to pursue deals with cable operators and Internet providers to offer subscribers the Red Zone Channel, which provides cut-ins to the crucial moments of NFL games. In addition, cable subscribers living in areas where satellite service isn't available will be able to buy the full Sunday Ticket package over the Internet.

To be sure, the NFL still needs to reach agreements with cable and broadband providers on the price and access to the Red Zone Channel. Negotiations with those companies to carry the NFL Network, the league-owned cable channel, have dragged on for several years. The league also has been battling Comcast Corp. in court and at the Federal Communications Commission over the cable provider's decision not to include the NFL Network in its basic digital tier of channels.

However, the deal with DirecTV bodes well for the league as it approaches talks with its broadcast partners for new agreements. Its current deals with General Electric Co.'s NBC Universal, CBS Corp. and Walt Disney Co.'s ESPN expire after 2011. Under those deals, ESPN pays the NFL $1.1 billion a season, NBC Universal pays $600 million and CBS pays $620 million.