AT&T, DirecTV Now face tricky situation with NFL’s exclusive Verizon mobile deal

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DirecTV Now will have to black out NFL games for smartphone users on licensed networks.

While DirecTV’s pricey NFL Sunday Ticket deal supplied a shiny trinket during AT&T’s $49 billion purchase of the satellite TV company in 2015, AT&T’s ability to integrate that program licensing asset into its next-generation products is proving to be tricky.

Launching today, AT&T’s new virtual pay-TV service, DirecTV Now, will have to black out NFL games for smartphone users on licensed networks including ESPN, FOX and NBC because Verizon has an exclusive mobile-content deal with the pro football juggernaut. 

“NFL Football will be confusing at best,” MoffettNathanson analyst Craig Moffett said in a note to investors Tuesday. “It will be blacked out based on the device being used, not based on location, as it is Verizon, not AT&T, that owns the rights to the NFL on handsets." Furthermore, Sunday Ticket will be unavailable on the OTT offerings.

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This has to be, in the parlance of DirecTV Now’s target market, a sick burn to AT&T, which is paying the NFL, on average, $1.5 billion a year over an eight-season span, based on an NFL Sunday Ticket licensing deal it signed in October 2014.

DirecTV’s content partners, meanwhile, can’t be thrilled, either, with ESPN paying $1.9 billion a year all by itself for NFL football. 

Meanwhile, the lack of ability to present TV’s most popular programming source, the NFL, on wireless handsets undermines AT&T’s core tenant for DirecTV Now.

“We developed the platform with the mindset that it has to be mobile,” AT&T Entertainment Group CEO John Stankey said Monday while unveiling the platform at a New York City launch party. “The whole concept is mobile first.”

That’s not the only viewing limitation DirecTV Now users face: The platform is unplayable on the two biggest connected gaming consoles, Sony PlayStation and Microsoft Xbox One.