Los Angeles — More than a decade after Apple disrupted the music industry and Amazon ruined retail, tech tycoons are looking to a new field of change, live sports. I turned it.
Encouraged by their deep pockets, Apple and Amazon want to increase the number of viewers of their streaming subscription services, including the National Football League, Major League Baseball, Formula One Racing, and media conferences at college conferences. We are in the process of negotiating rights.
According to five people familiar with the process, they are vying for NFL Sunday tickets on behalf of DirecTV. This is a package that the league wants to sell over $ 2.5 billion a year, about $ 1 billion higher than its current cost. Google is also eager to bid on rights from YouTube from 2023, two people familiar with the proposal said.
The interest of tech companies is thrilling for sports leagues and horrifying for media companies afraid to compete with rivals who raise tens of billions of dollars from dominant positions in other businesses. Last year, sports accounted for 95 of the 100 most watched shows on television.
“It’s hard to compete with entities that don’t follow the same financial rules,” said Bob Eiger, a former CEO and chairman of the Walt Disney Company, which manages ESPN, referring to funding for technology companies.
The NFL Sunday Ticket Package (Showing Off-Market Sunday NFL Games Not Shown on Local TV) is available because DirecTV has chosen not to bid. It loses as much as $ 500 million a year on packages, but also benefits from a credible foundation of about 2 million subscribers.
According to 12 people in the sports, media and technology industries, Apple is considered a top candidate. However, negotiations on the simultaneous sale of NFL media assets such as the NFL Network, RedZone Channel, and NFL +, a new subscription service that provides access to live games on mobile devices, have delayed the final deal.
Apple prioritizes the acquisition of packages. According to three people familiar with the process, Apple CEO Tim Cook will work with league players and influential team owners, including Jerry Jones, who owns the Dallas Cowboys, and the Craft family, who owns the New England Patriots. I met. Apple declined to comment.
Still, Amazon, ESPN +, and YouTube, which considered bidding for rights in 2014, are continuing their search, some of these people said. Brian Lorap, NFL Chief Media and Business Officer, said in a statement that the league plans to sign a deal in the coming months. “Many companies are in a strong position to land Sunday tickets, but there are still ways to go through this process,” Lorup added.
Some details of the negotiations were previously Report by Sports Business Journal..
Fans will have access to all games on Sunday, regardless of who won the rights, but will probably pay a premium to add services to Apple, Amazon, ESPN +, or YouTube services. It’s not yet clear if the premium is more or less than DirecTV’s $ 294 bill for the year, they added.
Apple and Amazon are trying to position themselves for the future without cables. According to industry-tracking investment company Moffett Nathanson, traditional pay TVs have accounted for a quarter of subscribers (about 25 million households) since 2015 as people have replaced cable packages with apps like Netflix and Hulu. I lost it.
However, the price of live sports rights is expected to rise. According to data from Moffett Nathanson, the largest media companies such as Disney, Comcast, Paramount and Fox are expected to spend a total of $ 24.2 billion on rights in 2024, nearly double that of 10 years ago.
Fragmentation of the distribution model decades ago has created opportunities for Apple and Amazon. Both companies want to expand their media even further by selling Apple TV + and Amazon Prime subscriptions. These services not only include their own exclusive shows and sports, but also act as a portal to sell additional streaming services such as Starz and HBO Max, with each subscription sold to Apple and Amazon. Pay more than 15% of.
Investment bank BMO Capital Markets estimates that Amazon generates more than $ 3 billion annually from third-party subscription sales. For the business model to work, Apple and Amazon need to attract more viewers, and sports are the most powerful attraction of the media. Companies may be willing to lose money on Sunday Tickets to expose new customers to other parts of the business, in the same calculations DirecTV has historically done.
The challenge for Apple and Amazon is to produce high-quality broadcasts, stream games perfectly to millions of simultaneous viewers, and get used to switching games remotely rather than moving to a new app. To convince a somewhat skeptical sports league that they can retain their sports fans. ..
Their interest marks a departure for the streaming industry. Over the years, many executives have agreed with Netflix CEO Reed Hastings. His company said he wasn’t interested in sports or news because it was watched only once, live and never again.
However, many streaming companies are rethinking as competition for subscribers intensifies, stock prices fall, and profitability remains out of reach for many.
Their new interest in sports was unveiled last Monday at MLB’s Home Run Derby at the Dodger Stadium in Los Angeles. There, Apple, Amazon, Google, and Facebook executives interacted with sports leaders to disrupt the party that was historically monopolized by the television industry.
Tech’s dominance in live sports is not a natural conclusion. Many of the most sought after rights have been contracted with broadcasters for over a decade. The league is wary of outsourcing marquee properties like “Sunday Night Football” to streamers, as traditional television still offers the largest audience, and favors selling tertiary packages to streamers. doing.
Reaching a large audience is very important for a league that seeks to open courts to the widest possible fan base to ensure the long-term survival of the sport.
Gerry Cardinale, founder and managing partner of Redbird Capital, which has invested in many sports media, said: “This is the perfect place to offer as many sports as possible in Topshop.”
According to video-on-demand service analysis company Antenna, Apple launched Apple TV +, a $ 4.99 streaming service in 2019, with an estimated 16.3 million paying subscribers in the United States. Amazon claims more than 200 million Amazon Prime subscribers. Amazon Prime started in 2006 primarily as a high-speed delivery service, with the addition of on-demand movies later. Today, some customers pay $ 8.99 per month only for access to Prime Video.
Tech companies are willing to pay extra to add sports to their services. Over the past year, Apple has more than doubled its annual rights payments for Major League Soccer and has signed a $ 2.5 billion contract over 10 years for global rights to 1,000 games. We also invested about $ 85 million annually in a new package of MLB games every Friday night.
Amazon has agreed to pay $ 1 billion a year for Thursday night’s NFL games. This is a 50 percent increase over previous transactions with Fox. He also bid over $ 100 million annually for F1 racing rights in the United States in negotiations lost to ESPN. This renewed $ 75 million in rights, 15 times more than in previous contracts. Sports Business Journal.
But while Apple and Amazon have the potential to be devastating, they haven’t yet won the Marquee Rights package in the United States. This is reminiscent of 20 years ago when sports leagues were afraid to lose viewers by moving games from network TV to cable TV. However, the changes have gradually become standard.
Traditional TV companies are trying to stop Apple and Amazon by launching their own streaming subscription service. Last year, NBCUniversal-owning Comcast closed the NBC Sports Network, strengthened its USA channel, and encouraged people to pay for Peacock, which aired the English Premier League football game exclusively. Similarly, ESPN has signed a contract with the National Hockey League to air several games on ESPN + services, and CBS has aired marquee soccer games on Paramount +.
But these services are just a small percentage of the more than 100 million cable subscribers media companies once reached. As a result, most sports programs are played on traditional pay-TV channels, which can guarantee more viewers to leagues and advertisers.
The National Basketball Association will be the first major test of the new competitive environment. Contracts with ESPN and Turner will run throughout the 2024-25 season. Most sports and media executives predict that the league will stick to traditional broadcasters in most games, while opening up some of the rights of tech companies.
George Pyne, founder of Blue Inn Capital, a sports private equity firm and former Chief Operating Officer of NASCAR, said: “They can still have long-term relationships with network partners, but they step into new media.”
Until then, the best opportunity for Apple and Amazon could be overseas, where the European football league resells rights every two to three years. Amazon recently won the UEFA Champions League, one of Europe’s top tournaments in the UK and Italy. We also have rights to League 1 in France, which we offer to Prime Video subscribers for an annual fee of about $ 90.
Daniel Cohen, head of global media rights consulting for sports agency Octagon, said media companies would be pressured to expand geographically for competition. Television stations also pool their financial firepower or buy each other altogether to compete with tech giants who are willing to pay billions of dollars for rights like NFL Sunday tickets. You can form a team to do so.
“It comes down to the Silicon Valley ego,” Cohen said of the expensive NFL deal. “I don’t see the way to profitability. I see the way to victory.”
