Three Companies Profiting From the National Football League

Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The NFL is one of the most beloved sports in the United States. Every year, millions of fans attend games, watch weekly matchups, and spend money on the sport they love. Find out how three companies are taking advantage of America’s love for this great sports pastime.

Verizon (NYSE: VZ)

Verizon recently renewed its contract with the NFL to offer exclusive content. Verizon paid a reported $1 billion for a four-year renewal. The deal between Verizon and the NFL gives Verizon subscribers every NFL game available via NFL Mobile on their Verizon phones. Verizon’s original deal, signed in 2010, was a four year $720 million contract with the NFL.

The renewal includes NFL Playoff games and the Super Bowl. In the old deals these games were not included. The new deal also includes all local games. Previously, customers could only pick from a selection of games. All games played, including Thursday night, Sunday night, and Monday Night Football will be available to Verizon subscribers.

The deal with the NFL is financially important for Verizon. While the $1 billion purchase could be enough if it helps take away subscribers from rival telecom companies, it can help the company’s revenue. The NFL package is available to Verizon subscribers for $5 a month.

Data usage will skyrocket as customers watch NFL games, and this could lead to many customers going over data caps and having to pay high fees for used data. Verizon is also hoping to integrate strong advertisements into NFL Mobile, which will greatly impact advertising.

Microsoft (NASDAQ: MSFT)

At its official unveiling of its new console, Xbox One, Microsoft showed off exclusive content to set its console apart from Sony’s Playstation 4. Among the highlights was exclusive content from the National Football League through a new partnership. The new deal between Microsoft and the NFL is rumored to be worth $400 million over a five-year period.

The new Xbox One will give users a more personalized gaming experience with NFL content, movie streaming, Blu-Ray disc playing, Skype integration, and voice control. Each console will also come with built in Kinect technology. Xbox One users will be able to Skype other NFL fans during games, watch multiple screens of games, and see their fantasy football statistics in front of them. The deal between Microsoft and the NFL also brings Surface tablets to the sidelines. Coaches will have access to these tablets to make plays and watch replays.

The question remains whether the NFL deal is enough to get customers to choose the Xbox One over the Playstation 4. The bigger question may be whether or not the new console can help Microsoft’s revenue and profits. In fiscal 2012, Microsoft’s entertainment and devices unit had sales of $9.6 billion. This represents only 13% of Microsoft’s revenue. The entertainment segment also has smaller profit margins than other business units, meaning less profit. The entertainment segment is expected to pass $10 billion in fiscal 2013 and could beat expectations if customers like exclusives like the NFL deal.

Electronic Arts (NASDAQ: EA)

In the fall of 2013, Electronic Arts will release its newest video game in the Madden franchise. Named after legendary NFL coach John Madden, the game is one of only two sports franchises to top 99 million copies in sales. This year’s game will be extra special and will come with high expectations. The game line is celebrating the 25th anniversary with the appropriately named “Madden NFL 25.” This is a break away from the normal titles, which are named after the year they are released.

Expectations for the new Madden game are already extremely high. The game added back several features from previous versions of the game. Among them are "owner mode" and importing draft classes from “NCAA Football ‘14.” Online retailer Amazon.com was even offering customers free Sunday NFL Ticket packages with pre-orders of Madden NFL 25 Anniversary Edition.

Electronic Arts needs a hit with the newest Madden game and it should get it. The company has seen the sports franchises of Madden, FIFA and NCAA Football carry the company forward. New game lines like Battlefield and a pending deal with Disney’s Star Wars unit should help, but sports is still where the cash is. Electronic Arts announced it is not releasing games for the Nintendo WiiU, which means the Madden game needs to sell well on the Playstation 3 and Xbox 360.

Conclusion

Microsoft priced its new Xbox One console $100 higher than the Playstation 4. This move has many people already giving the race to Sony. However, if Microsoft can convince people of its true entertainment center rather than console use, sales could still be as huge as originally expected. Deals like the one with the NFL help the Xbox One be the center of the living room for video games and entertainment. Microsoft stock should see a nice boost going into the fall with the new console.

Verizon will continue to battle AT&T and others for telecom subscribers. Verizon has taken $1 billion and spent it wisely in a move that could eventually pay itself off. Even if Verizon loses money on the Verizon deal, it has attempted to differentiate itself and can hopefully pick up some subscribers along the way.

Electronic Arts is poised for a big year with the anniversary “Madden NFL 25” video game. New games from the Star Wars franchise and the upcoming 2014 World Cup will help the company post revenue gains and likely beat analysts’ targets.


Chris Katje has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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