Word is that Apple, Amazon and The Walt Disney Co., holders of three of the media industry’s deepest pockets, are the only remaining bidders for the National Football League’s out-of-market programming package, NFL Sunday Ticket. . Although much of the talk around the deal is about the price – between $2.5 billion and $3 billion a year, that’s about double what current rights holder DirecTV paid for the package. in 2014 – what could be most valuable for streaming bidders is the impact Sunday Ticket could have on subscriber growth.
There is no doubt that each of the three players has the financial strength to manage a deal. Apple has a market cap of $2.29 trillion, Amazon’s is $1.15 trillion, and Disney is, well, Disney. And while all three could use access to the off-market package to their respective advantage, at least for now it looks like the one who would benefit the most would be Apple.
In an interview, LHB Media & Entertainment Chairman and CEO Lee Berke said that while Sunday Ticket helped DirecTV establish its linear satellite TV business nearly 30 years ago, the package is the more likely to benefit streamers today.
“Now I think it’s better to offer it as a streaming product because you want increased bandwidth, you want to offer betting channels, you want to offer all kinds of variations,” Berke said, adding that in addition to games, there are opportunities like Manningcast [Monday Night Football with Peyton and Eli] and other peripheral programs that may be related to the package. Also part of the mix are stakes in NFL Media – which hosts NFL Network and RedZone – and possibly mobile rights, which could allow a streamer to price and offer services more creatively.
“There have been all kinds of opportunities that have not been taken advantage of in part because there is a limited amount of bandwidth on the satellite,” Berke added. “I think that’s why you’re looking at a substantial streaming presence for Sunday Ticket in the future, which will allow you to experience these games in more and different ways than in the past.”
It’s Apple’s deal to lose
While all three bidders have a streaming presence, Berke thinks Sunday Ticket makes the most sense for Apple TV Plus.
“I think the overall legacy and ethos of the NFL from a media perspective is not about putting all your eggs in one basket,” Berke said. “They like to involve as many different media companies as possible, because you’re not beholden to anyone, you put them in competition, they try different approaches, they create, they’re inventive. Since Amazon is making a major investment in Thursday night footballit just seems like Apple, now expanding its sports resources with Major League Baseball and MLS, it seems like the next step would be to establish a relationship with the NFL as well.
Amazon pays an estimate $1 billion a year for Thursday Night Football rights.
While the NFL would likely benefit from a closer relationship with the hardware juggernaut, Apple could also use that relationship to create its own opportunities.
“I think there’s an advantage because everyone is looking at it like there’s this finite number of games. No, there isn’t,” Berke said. “The NFL alone created RedZone from this. They created a fantasy [Football] channel out of it. Now you’re bringing in someone else with huge expertise – Apple, Amazon or Disney. It looks like you’ll have other very creative people, very tech-savvy people who can come up with all kinds of variations.
Berke added that Sunday Ticket’s appeal would not stop at bringing more subscribers into the streaming video fold.
“It’s not just media profitability,” Berke said. “For Apple, does it help them sell hardware? Does it help them sell watches? Does it offer unique features on an iPad when you get Sunday Ticket? These are really, really precious things.
Apple also seems more than willing to dive deep into sports rights after years on the sidelines. Earlier this month, the company reignited talks for college football rights from the Big Ten Conference, which recently expanded to 16 teams by adding Pac-12 powerhouses USC and UCLA.
“[Apple’s] the appetite for content is seemingly insatiable between Apple TV Plus originals, MLB, MLS and maybe Sunday ticket OTT,” Wells Fargo media analyst Steven Cahall wrote in a recent research note.
Apple, despite its dominance in the technology sector, lags far behind its peers in the streaming video industry. Launched on November 1, 2019, Apple TV Plus has around 25 million subscribers paying $4.99 per month for its video streaming service. By contrast, Disney Plus – which launched 11 days later on November 12, 2019 – has 137 million customers worldwide. Amazon Prime Video has about 200 million subscribersbut most of them are there for Amazon Prime free shipping.
But streamers have seen the explosive subscriber growth of the past few years begin to slow in recent quarters as inflation, the overall economy and subscriber fatigue have caused consumers to cut back on spending. While most point to Netflix’s loss of 200,000 subscribers in the first quarter as a sign that streaming is losing its luster, other SVOD companies have seen their growth slow. Disney Plus added 2 million subscribers in the fiscal fourth quarter – half of what analysts expected – but appeared to rebound in subsequent quarters, with streaming subscriber additions in the fiscal first quarter increasing by 11 .2 million and in the second fiscal quarter of 9.2 million. But there are concerns that consumers may be turning away from some streaming services due to rising monthly fees, prompting many to offer ad-supported versions of their service at discounted rates.
Tick, tick, tick
There are still plenty of ways this could play out. In 2021, Amazon was supposed to be the Sunday Ticket frontrunner, with that momentum shifting to Apple in April 2022. More recently, speculation is that DirecTV could still be in the mix, choosing to split the rights with a streamer or achieve a agreement to retain lucrative commercial rights (sports bars and restaurants) for the package. The NFL could also decide to keep Sunday Ticket in-house, possibly making it available through its own direct-to-consumer offering – NFL Plus – which is expected to launch in July.
And there is still plenty of time to find an agreement. DirecTV’s exclusivity does not expire until after the 2022-23 season, leaving several months for further negotiations.
On the other hand, it’s closing in on when the NFL announced previous renewals – DirecTV signed an eight-year extension for Sunday Ticket in October 2014, a month after the start of the final season under its former contract. Whether it takes longer is anyone’s guess. ▪️
While Sunday Ticket has been around for almost 30 years, its value depends on who owns the rights. In DirecTV’s early days, it was a big catalyst for subscribers to its satellite TV service – you still have to subscribe to linear DirecTV to get access to Sunday Ticket – and has paid off in spades in subscriber growth. While there were other factors such as pricing, quality of service, clearer pictures, a national footprint and access to then-scarce HDTV channels, Sunday Ticket helped propel DirecTV to the top tier of distributors of TV. A year after DirecTV launched Sunday Ticket in 1994, its subscriber base nearly quadrupled from 332,000 in 1994 to 1.2 million in 1995. By 2014, the satellite service had more than 20 million customers .
Will Sunday Ticket have the same impact on its new owners? Probably not. It doesn’t even have the same impact on DirecTV, which has lost a large number of subscribers over the years – it had 14.6 million in the second quarter – while continuing to offer Sunday Ticket. DirecTV does not reveal the number of subscribers for Sunday Ticket, but estimates put it at around 2 million customers. Other reports estimate that DirecTV loses about $500 million a year on Sunday Ticket.
At Kagan, the media research unit of S&P Global Market Intelligence, research director Deana Myers estimates that the number of subscribers for Sunday Ticket is “well below” 2 million, and while she sees the package having some perks for streamers, don’t count on it being too dramatic.
“I think getting Sunday Ticket would probably put Apple TV Plus on the map, but not to the extent it did for DirecTV,” Myers wrote in an email message. “The value of Sunday Ticket to DirecTV was that it brought in a lot of really high-end subscribers who would sign up for the best packages. In the prosperous old world of pay TV, it worked, but it’s costing them a lot of money today. Apple could gain subscribers, they have the money for such a deal, they bought a lot of sports rights and it could help them in their main goal to sell more devices.
But Berke thinks Sunday Ticket’s advantage lies in more than a stronger subscriber base.
“If Apple potentially co-owns NFL Media and they have five different ways to take this package and take it out in different ways and if that helps them create a whole new version of NFL-specific iPhones, that’s more than carried its weight,” Berke said. ▪️
And then there were three
Apple has re-established itself as a leader, according to some reports, but what appears to be delaying the deal is the stake in NFL Media and the ultimate prize. While the NFL would like up to $3 billion for the rights, experts believe the deal will be lower, possibly in the $2 billion range.
That’s still above the $1.5 billion a year the current rights holder – DirecTV – pays, but it may indicate problems with the structure of the deal. According CNBC, sources familiar with the deal say the NFL requires anyone who buys Sunday Ticket to sell it at an annual market value of $300-$400 or more, largely due to deals the NFL has with broadcasters CBS and Fox. So there won’t be a major reduction in service, which DirecTV has done in the past to maintain existing sub-numbers and attract new customers. Apple and Amazon are also said to be very interested in international broadcast rights, which Myers thinks the NFL would like to sell separately.
“I think the limits that the NFL is trying to put on a deal will mean the deal will fall way short of what they’re asking for,” Myers said.
Ultimately, any deal will come down to who needs Sunday Ticket the most. And if scale ever matters in the streaming business, it seems to be Apple.