The word is that Apple, Amazon and The Walt Disney Co., possessors of three of the deepest pockets in the media business, are the sole remaining bidders for the National Football League’s out-of-market programming package, NFL Sunday Ticket. While a lot of the talk around the deal is the price tag — at $2.5 billion to $3 billion annually, it is about twice what current rightsholder DirecTV paid for the package in 2014 — what could be most valuable to the streaming bidders is the impact Sunday Ticket could have on subscriber growth.
There is no doubt that each of the three players have the financial strength to handle a deal. Apple has a $2.29 trillion market cap, Amazon’s is $1.15 trillion and Disney is, well, Disney. And even though all three could use access to the out-of-market package to their respective advantage, it seems at least for now that the one that would benefit most would be Apple.
In an interview, LHB Media & Entertainment president and CEO Lee Berke said that while Sunday Ticket helped DirecTV establish its linear satellite TV business nearly 30 years ago, the package is most likely to benefit streamers today.
“Now, I think it is best offered up as a streaming product because you want increased bandwidth, you want to come up with betting channels, you want to come up with all sorts of variations,” Berke said, adding that in addition to games, there are opportunities like the Manningcast [Monday Night Football with Peyton and Eli] and other peripheral programming that could be tied to the package. Also part of the mix are equity stakes in NFL Media — which houses NFL Network and RedZone — and possibly mobile rights, which could allow a streamer the chance to price and package services more creatively.
“There have been all sorts of opportunities that haven’t been exploited in part because there is a limited amount of bandwidth on satellite,” Berke added. “I think that’s why you’re looking at a substantial streaming presence for Sunday Ticket going forward that allows you to exploit those games in more and different ways than you have in the past.”
It’s Apple’s Deal to Lose
While all three bidders have a streaming presence, Berke believes that Sunday Ticket makes the most sense for Apple TV Plus.
“I think that the overall heritage and philosophy of the NFL from a media standpoint is not to put all of your eggs in one basket,” Berke said. “They like to have as many different media companies as possible involved, because you’re not beholden to any one, you get them to compete, they try different approaches, they create, they’re inventive. Since you have Amazon making a major investment in Thursday Night Football, it just seems like Apple, now developing its sports resources with Major League Baseball and MLS, it seems like the next step would be establishing an NFL relationship as well.”
Amazon is paying an estimated $1 billion per year for Thursday Night Football rights.
While The NFL would likely gain from a closer relationship with the hardware juggernaut, Apple too could use the relationship to create its own opportunities.
“I think there’s upside because everybody is looking at it like there is this finite number of games. No there’s not,” Berke said. “The NFL on its own created RedZone out of this. They created a Fantasy [Football] channel out of it. Now you bring in somebody else with a huge amount of expertise — an Apple, Amazon or Disney. It seems like you’ll get some other very creative people, some very tech-savvy people that can come up with all sorts of variations.”
Berke added that the attractiveness of Sunday Ticket wouldn’t stop at just bringing more subscribers into the streaming video fold.
“It’s not just the profitability of the media,” Berke said. “For Apple, does it help them sell hardware? Does it help them sell watches? Does it offer unique functions on an iPad when you get Sunday Ticket? Those are really, really valuable things.”
Apple also seems more than willing to dive deeply into sports rights after years of sitting on the sidelines. Earlier this month, the company restarted talks for rights to Big Ten Conference college football, which recently expanded to 16 teams by adding Pac-12 powerhouses USC and UCLA.
“[Apple’s] content appetite 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 tech sector, is lagging significantly behind its peers in the streaming video business. Launched on November 1, 2019, Apple TV Plus has about 25 million subscribers paying $4.99 per month for its video streaming service. In contrast, Disney Plus — launched 11 days later on November 12, 2019 — has 137 million global customers. Amazon Prime Video has around 200 million subscribers, but most of those are there for the free shipping from Amazon Prime.
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. While most point to Netflix’s 200,000-subscriber loss in Q1 as a sign that streaming was losing its luster, other SVOD companies have seen growth slow. Disney Plus added 2 million subscribers in fiscal Q4 — half of what analysts expected — but seemed to rebound in later quarters, with fiscal Q1 streaming subscriber additions rising by 11.2 million and in fiscal Q2 additions up by 9.2 million. But there are fears that consumers are backing away from some streaming services because of rising monthly charges, prompting many to offer ad-supported versions of their service at reduced fees.
Tick, Tick, Tick
There are still a lot of ways this could play out. In 2021, Amazon was said to be the front-runner for Sunday Ticket, with that momentum shifting to Apple in April 2022. More recently, speculation is that DirecTV could still be in the mix, opting to share rights with a streamer or reaching a deal to retain lucrative commercial rights (sports bars and restaurants) for the package. The NFL also could 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 a lot of time to hammer out an agreement. DirecTV’s exclusivity doesn’t expire until after the 2022-23 season, giving several months for further negotiations.
On the other hand, it is getting close to the time that the NFL has announced previous renewals — DirecTV signed an eight-year extension for Sunday Ticket in October 2014, a month after the final season under its old deal began. Whether this will take longer is anyone’s guess.
Do You Wanna Pay for Some Football?
While Sunday Ticket has been around for nearly 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 DirecTV linear to get access to Sunday Ticket — and 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-rare HDTV channels, Sunday Ticket helped push DirecTV into the No. 1 spot among TV distributors. 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’s not even having the same impact on DirecTV, which has shed a huge number of subscribers over the years — it had 14.6 million as of Q2 — all while it continued to offer Sunday Ticket. DirecTV does not reveal subscriber numbers for Sunday Ticket, but estimates put it at around 2 million customers. Other reports estimate that DirecTV is losing about $500 million per year on Sunday Ticket.
At Kagan, the media research unit of S&P Global Market Intelligence, research director Deana Myers believes the subscriber tally for Sunday Ticket is “well below” 2 million, and while she sees the package having some benefit to streamers, don’t count on it being too dramatic.
“I think getting Sunday Ticket would likely put Apple TV Plus on the map, but not to the degree that it did for DirecTV,” Myers wrote in an email message. “Sunday Ticket’s value for DirecTV was that it drew a lot of really high-end subscribers who would sign up for the top packages. In the old, successful pay TV world that worked, but it loses a lot of money today for them. Apple could gain subs, they have the cash for such a deal, they have been buying a lot of sports rights and it could help them with their main goal of selling more devices.”
But Berke believes the benefit of Sunday Ticket lies in more than just a beefier subscriber base.
“If Apple is potentially a co-owner of NFL Media and they come up with five different ways to take that package and off it up in different fashions and if it helps them create a whole new version of iPhones that are NFL-specific, it’s more than carried its weight,” Berke said.
And Then There Were Three
Apple has re-established itself as the front-runner, according to some reports, but what appears to be holding up the deal are the equity stake in NFL Media and the ultimate price tag. While the NFL reportedly wants as much as $3 billion for the rights, pundits believe the deal will come in lower, perhaps in the $2 billion range.
That’s still above the $1.5 billion annually DirecTV is paying, but may point to problems with the deal’s structure. According to CNBC, sources familiar with the deal say that the NFL is requiring that whoever buys Sunday Ticket price it at or above its $300 to $400 yearly market value, mainly because of deals the NFL has with broadcasters CBS and Fox. So there will be no deep discounting of the service, something that DirecTV has done in the past to keep existing sub numbers up and attract new customers. Apple and Amazon also are said to be very interested in international streaming rights, something that Myers believes the NFL would like to sell separately.
“I think the limitations that the NFL is trying to put on a deal will mean the deal comes in pretty far below what they are asking,” Myers said.
In the end, any deal will come down to who needs Sunday Ticket the most. And if scale still matters in the streaming business, that would seem to be Apple. ■
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Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.