In an example of how valuable live football is to media companies today, AT&T may pull out of its merger with DirecTV if the satellite TV operator cannot renew its contract with the NFL.
In this SEC regulatory filing, there is a clause that allows AT&T to back out of the $48.5 billion deal if DirecTV fails to re-up with the NFL:
The parties also have agreed that in the event that DIRECTV’s agreement for the “NFL Sunday Ticket” service is not renewed substantially on the terms discussed between the parties, the Company may elect not to consummate the Merger, but the Company will not have a damages claim arising out of such failure so long as DIRECTV used its reasonable best efforts to obtain such renewal.
DirectTV offers a popular NFL Sunday Ticket package that costs up to $300 per year and allows customers to watch every game during the regular season, no matter where they live. The company has an exclusive agreement with the NFL that expires after the upcoming 2014-15 season. Reuters notes that the contract is now worth $1 billion annually.
The AT&T-DirectTV deal, rumored for weeks, was announced by the companies on Sunday. The merger, which could take up to a year to close, sets the stage for AT&T to compete head-to-head with Comcast, which is in the process of acquiring Time Warner Cable for more than $45 billion.