LOS ANGELES — More than a decade after Apple disrupted the music industry and Amazon rocked retail, the tech heavyweights have set their sights on a new arena ripe for change: live sports.
Buoyed by their deep pockets and eager to increase the viewership of their streaming subscription services, Apple and Amazon have plunged into negotiations over media rights to the National Football League, Major League Baseball, Formula 1 racing and college conferences.
They are competing to replace DirecTV for the rights to NFL Sunday Ticket, a package the league aims to sell for more than $2.5 billion a year, about $1 billion more than it currently costs, according to five people familiar with the process. Don’t want to miss out, Google has also made an offer from YouTube for the rights from 2023, said two people familiar with the offer.
The interest of the tech companies is a thrill for sports leagues and a scare for media companies that fear competition from rivals raising tens of billions of dollars from dominant positions in other companies. Sports accounted for 95 of the 100 most-watched programs on television last year.
“It’s tough when you compete with entities that don’t follow the same financial rules,” said Bob Iger, the former CEO and chairman of the Walt Disney Company, which controls ESPN, referring to the bankroll of technology companies.
The NFL Sunday Ticket package — which shows off-market NFL games on Sundays that aren’t shown on local television — is available because DirecTV has chosen not to bid. It has lost as much as $500 million annually to the package, although it has also benefited from a reliable base of approximately 2 million subscribers.
Apple is considered the frontrunner, according to a dozen people in the sports, media and tech industries. But a final deal has been delayed by negotiations for a simultaneous sale of NFL media assets, including the NFL Network, RedZone channel and NFL+, a new subscription service that provides access to live games on mobile devices.
Apple has made winning the pack a priority. According to three people familiar with the process, Apple CEO Tim Cook has met with league officials and influential team owners such as Jerry Jones, owner of the Dallas Cowboys, and the Kraft family, who own the New England Patriots. Apple declined to comment.
Still, Amazon, ESPN+ and YouTube, which were investigating a bid for the rights in 2014, remain on the hunt, some of these people said. Brian Rolapp, the NFL’s chief media and business officer, said in a statement that the league expects to close a deal in the coming months. “A number of companies are in a strong position to potentially bring in Sunday Ticket, but we still have a long way to go in this process,” added Mr Rolapp.
Some details of the negotiations have been previously reported by the SportsBusiness Journal.
Fans will still be able to access all games on Sunday regardless of who wins the rights, but they’ll likely pay a premium to add the service to their Apple, Amazon, ESPN+ or YouTube service, some of the dozen said. people. It’s not yet clear whether that premium would be more or less than the $294 DirecTV charges for a year, she added.
Apple and Amazon are trying to position themselves for a cable-free future. According to MoffettNathanson, an investment company that tracks the industry, since 2015 traditional pay TV has lost a quarter of its subscribers — about 25 million homes — as people traded cable packages for apps like Netflix and Hulu.
But the price of live sports rights is only expected to rise. The largest media companies, including Disney, Comcast, Paramount and Fox, are expected to collectively spend $24.2 billion on rights by 2024, according to data from MoffettNathanson, nearly double what they spent a decade earlier.
The fragmentation of a decades-old distribution model has created an opportunity for Apple and Amazon. The companies want to dive deeper into the media by selling subscriptions to Apple TV+ and Amazon Prime. In addition to featuring their own exclusive shows and sports, these services also act as portals that sell additional streaming offers, such as Starz and HBO Max, which pay Apple and Amazon 15 percent or more of every subscription sold.
Amazon generates more than $3 billion annually from third-party subscription sales, according to estimates by investment bank BMO Capital Markets. For the business model to work, Apple and Amazon need to attract more viewers, and sports are the strongest draw in the media. The companies may be willing to lose money on Sunday Ticket to introduce new customers to other parts of their business, the same calculation DirecTV made in the past.
The challenge for Apple and Amazon is to convince somewhat skeptical sports leagues that they can produce high-quality broadcasts, flawlessly stream games for millions of simultaneous viewers, and keep sports fans accustomed to switching between games with a remote — not switching to a new one. app to navigate .
Their interest marks a departure for the streaming industry. For years, many executives agreed with Netflix chief executive Reed Hastings, who said his company was not interested in sports or news because it was only watched once, live and never watched again.
But many streaming companies are reconsidering as competition for subscribers intensifies, stock prices have plummeted and profitability — for many — remains out of reach.
Their renewed interest in sports was on display last Monday at MLB’s Home Run Derby at Dodger Stadium in Los Angeles, where executives from Apple, Amazon, Google and Facebook socialize with sports leaders, shattering a party traditionally monopolized by the television industry. , crashed.
Tech’s dominance of live sports is not a foregone conclusion. Many of the most sought-after rights have been under contract with broadcasters for a decade or more. Leagues have preferred to sell tertiary packs to streamers as they are wary of entrusting tents like ‘Sunday Night Football’ to them as traditional television still offers the largest audience.
Reaching a large audience is crucial for leagues, which want to reach the widest possible fan base to ensure the long-term viability of their sport.
“The death knell of the cable bundle has been largely exaggerated,” said Gerry Cardinale, the founder and managing partner of Redbird Capital, which has invested heavily in sports media. “It’s the best place to get a one-stop-shop offering of as many sports as there are available.”
Apple launched its $4.99 streaming service, Apple TV+, in 2019 and has an estimated 16.3 million paid subscribers in the United States, according to Antenna, a video-on-demand analytics company. Amazon claims more than 200 million subscribers to Amazon Prime, which started in 2006 as a faster shipping service and later added on-demand movies. Today, some customers pay $8.99 per month for access to Prime Video only.
The tech companies are willing to pay a premium to add sports to their services. In the past year, Apple agreed to more than double Major League Soccer’s annual rights payments with a 10-year, $2.5 billion deal for the worldwide rights to 1,000 games. It has also pledged approximately $85 million annually for a new package of two weekly Friday night MLB games.
Amazon agreed to pay $1 billion a year for Thursday night NFL games, a 50 percent increase from its previous deal with Fox. It also offered more than $100 million a year for rights to Formula 1 racing in the United States in a negotiation it lost to ESPN, which renewed the rights for $75 million, a 15-fold increase from the previous contract, according to Sports Business Journal.
However, for all their disruptive potential, Apple and Amazon have yet to win a selection rights package in the United States. That’s reminiscent of 20 years ago, when sports leagues feared they would lose viewers by shifting games from network television to cable. But gradually the change became standard.
Traditional television companies are trying to stave off Apple and Amazon by starting their own streaming subscription services. Last year, Comcast, owner of NBCUniversal, shut down NBC Sports Network to bolster its US channel and encourage people to pay for Peacock, where it exclusively broadcast some English Premier League football matches. Similarly, ESPN made a deal with the National Hockey League to broadcast some games on the ESPN+ service, and CBS has shown major football games on Paramount+.
But those services have a fraction of the more than 100 million cable subscribers the media companies ever reached. As a result, the bulk of sports programming goes on traditional pay-TV channels, where they can guarantee competitions and advertisers a wider audience.
The National Basketball Association will be the first major test of the new competitive landscape. The ESPN and Turner agreements will continue through the 2024-25 season. Most sports and media executives predict that the competition will remain with traditional broadcasters for most of its games, while a small share of rights will be taken away for a tech company.
“It hedges them for the future and exposes the product to a new audience,” said George Pyne, founder of sports private equity firm Bruin Capital and former NASCAR chief operating officer. “They can still have long-term relationships with network partners, but dip their noses into new media.”
Until then, the best opportunities for Apple and Amazon may lie abroad – where Amazon has been active for years – because Every two to three years, European football leagues resell their rights. Amazon recently acquired the rights to the top European tournament, the UEFA Champions League, in Great Britain, Germany and Italy. It also has rights to the French Ligue 1, which it offers to Prime Video subscribers for an annual fee of about $90, and the English Premier League.
Media companies will be pressured to expand geographically to compete, said Daniel Cohen, who advises global media rights for Octagon, a sports agency. Television networks could also team up to pool their financial firepower, or buy each other outright, to compete with tech giants willing to pay billions for rights like NFL Sunday Ticket.
“It comes down to an ego thing in Silicon Valley,” said Mr. Cohen on the expensive NFL deal. “I don’t see a path to profitability. I see a way to victory.”