Why Big Tech is making a big game for live sports

LOS ANGELES – More than a decade after Apple disrupted the music industry and Amazon shut down retail, tech heavyweights have set their sights on a new arena ripe for change: sports live sport.

Emboldened by ample pockets and a desire to grow the viewership of their streaming subscription services, Apple and Amazon have pushed themselves into media rights negotiations led by the National Football League, the National Football League, and the National Football League. Major baseball, Formula 1 racing and organized college conferences.

They are vying to replace DirecTV for the rights to the NFL Sunday Ticket, a package the league wants to sell for more than $2.5 billion annually, about $1 billion more than it currently costs, according to reports. 5 people familiar with the process. Not wanting to miss out, Google has also made an offer from YouTube for the rights starting in 2023, two people familiar with the offer said.

Tech companies’ concerns are the thrill of sports leagues and the horror of media companies that fear competition from rivals raking in tens of billions of dollars from dominant positions. in other businesses. Last year, sports accounted for 95 of the 100 most watched programs on television.

“It’s tough when you’re competing with entities that don’t follow the same financial rules,” said Bob Iger, former chief executive officer and president of The Walt Disney Company, which controls ESPN.

The NFL Sunday Ticket Bundle – which shows off-market NFL Sunday games not shown on local television – is available because DirecTV has chosen not to bid. It has lost upwards of $500 million per year on the plan, though it has also benefited from a trusted base of about 2 million subscribers.

According to dozens of people in the sports, media and technology industries, Apple is considered the leader. But a deal was eventually delayed by negotiations for a simultaneous sale of NFL media properties, including the NFL Network, the RedZone channel, and NFL+, a new subscription service that provides access into mobile games directly.

Apple has prioritized winning this package. Tim Cook, Apple’s chief executive, has met with league officials and influential team owners like Jerry Jones, who owns the Dallas Cowboys, and the Kraft family, who owns the New England Patriots, according to reports. three people familiar with the process. Apple declined to comment.

However, Amazon, ESPN+ and YouTube, which polled copyright bids in 2014, are still in the hunt, some of these people said. Brian Rolapp, the NFL’s director of sales and communications, said in a statement that the league expects to finalize a deal in the coming months. Mr. Rolapp added: “Some companies are in a strong position to get Sunday Tickets, but we still have a lot of ways to go in the process.

Some details of the negotiations have been reported by SportsBusiness Journal.

Fans will still be able to access all of Sunday’s games, no matter who wins the rights, but they will likely pay a fee to add the service to their Apple, Amazon, ESPN+ or YouTube service, a number of people out of dozens said. They added that it remains unclear whether that premium will be more or less than the $294 that DirecTV charges for a year.

Apple and Amazon are trying to position themselves for a cable-free future. According to MoffettNathanson, an investment firm that tracks the industry, since 2015, traditional pay TV has lost a quarter of its subscribers – about 25 million homes – as people transacted streaming packages. Cable TV grabs apps like Netflix and Hulu.

But the price of live sports rights is only forecast to increase. According to data from MoffettNathanson, the largest media companies, including Disney, Comcast, Paramount and Fox, are expected to spend a total of $24.2 billion on copyright by 2024, according to data from MoffettNathanson, almost double what they had spent a decade earlier.

The fragmentation of a decades-old distribution model has created opportunities for Apple and Amazon. The companies want to expand further into media by selling subscriptions to Apple TV+ and Amazon Prime. Besides housing their own exclusive shows and sports, those services also serve as portals that sell additional streaming services like Starz and HBO Max, paying for Apple and Amazon. 15% or more on every subscription sold.

According to estimates by investment bank BMO Capital Markets, Amazon generates more than $3 billion a year from third-party subscription sales. To make the business model work, Apple and Amazon must attract more viewers, and sports is the strongest attraction in the media. Companies may be willing to lose money on Sunday Tickets to reach new customers with other parts of their business, much like DirecTV previously calculated.

The challenge for Apple and Amazon will be to convince the somewhat skeptical sports federations that they can produce the perfect high-quality broadcasts, stream the perfect game for millions of concurrent viewers, and keep sports fans accustomed to switching between games with the remote – no navigating to a new app.

Their interest marks a start for the streaming industry. Over the years, many executives have agreed with Reed Hastings, the Netflix chief executive, who says his company doesn’t care about sports or news because it’s seen only once, live and never revisited.

But many streaming companies are reconsidering as competition for subscribers grows fiercer, stock prices fall and profits – for many – remain out of reach.

Their renewed interest in sport was on display last Monday during the MLB Home Run Derby at Dodger Stadium in Los Angeles, where executives from Apple, Amazon, Google and Facebook Interact with sports leaders, disrupting a historic party run exclusively by the television industry.

The dominance of technology over live sports is not a foregone conclusion. Many of the most sought after rights under contracts with broadcasters of a decade or more. Federations have advocated selling third-packs to streamers, wary of handing them over-market products like “Sunday Night Football” because traditional television still provides the amount biggest audience.

Reaching large audiences is important for leagues, which seek the widest possible fan base to ensure the long-term viability of their sports.

“The death knell of the cable bundle is largely exaggerated,” said Gerry Cardinale, founder and managing partner of Redbird Capital, which has made numerous investments in sports media. “It’s the best place to get a store that offers the widest range of sports available.”

Apple started its $4.99 streaming service, Apple TV+, in 2019 and has about 16.3 million paid subscribers in the United States, according to Antenna, a company that analyzes video services by request. Amazon claims to have over 200 million Amazon Prime subscribers, which started in 2006 primarily as a faster shipping service and has since added movies on demand. Today, some customers pay $8.99 a month for just access to Prime Video.

Tech companies are willing to pay a premium to add sports to their offerings. Over the past year, Apple has agreed to more than double Major League Soccer’s annual royalty payments to a 10-year, $2.5 billion deal for global rights to 1,000 games. It also committed about $85 million annually to a new bundle of two MLB games every Friday night.

Amazon agreed to pay $1 billion a year for NFL games on Thursday night, a 50% increase from its previous deal with Fox. It is also bidding for more than $100 million a year for the rights to Formula One racing in the United States in a negotiation it lost to ESPN, which renewed the rights for $75 million, a doubling 15 times more than the previous contract, according to Sports Business Magazine.

For all their disruptive potential, however, Apple and Amazon have yet to win a US franchise package. That’s reminiscent of 20 years ago, when sports federations feared losing viewers by switching games from network television to cable. But change gradually became the norm.

Traditional TV companies are trying to stop Apple and Amazon by starting their own streaming subscription services. Last year Comcast, which owns NBCUniversal, NBC Sports Network is Closed to bolster its US channel and encourage people to pay for Peacock, where it exclusively broadcasts some English Premier League football matches. Similarly, ESPN reached an agreement with the National Hockey League to broadcast some games on its ESPN+ service, and CBS has shown hit football games on Paramount+.

But those services represent only a fraction of the more than 100 million cable subscribers that media companies have ever reached. As a result, much of the sports programming is broadcast on traditional pay-TV channels, where they can secure tournaments and advertisers with larger audiences.

The National Basketball Association will be the first major test of the new competitive landscape. Its deals with ESPN and Turner run through the 2024-25 season. Most sports and media executives predict that the league will stick with traditional broadcasters for most of their games, while also carving out some small rights for a tech company.

“It secures them for the future and introduces products to new audiences,” said George Pyne, founder of sports private equity firm, Bruin Capital, and a former NASCAR executive. “They can still have long-term relationships with network partners but dip their toe in new media.”

Until then, the best chance for Apple and Amazon may be abroad, where European football leagues resell their rights every two to three years. Amazon recently won the rights to Europe’s premier league, the UEFA Champions League, in the UK and Italy. It also has the rights to French Ligue 1, which it offers Prime Video subscribers for an annual fee of around $90.

Daniel Cohen, who leads the global media rights consultancy for Octagon, a sports body, said media companies will be pressured to expand geographically to compete. Broadcasters could also team up to pool their financial might, or buy each other outright, to compete with tech giants willing to pay billions for royalties like NFL Sunday Ticket.

Mr. Cohen talks about the high-dollar NFL deal. “I don’t see a path to profit. I see a way to victory.”

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