LOS ANGELES — More than a decade after Apple rocked the music industry and Amazon disrupted retail, the tech heavyweights have set their sights on a new arena ripe for change: live sports.
Emboldened by their deep pockets and anxious to increase viewership of their streaming subscription services, Apple and Amazon have plunged into media rights negotiations held by the National Football League, Major League Baseball, Formula 1 races and college conferences .
They’re competing to replace DirecTV for the rights to the NFL Sunday Ticket, a package the league plans to sell for more than $2.5 billion a year, about $1 billion more than it currently costs, they said five people familiar with the process. In order not to miss out, Google has also offered an offer from YouTube for the rights starting in 2023, two people familiar with the offer said.
The interest of tech companies is a thrill for sports leagues and a dread for media companies, who fear competition from rivals raking in tens of billions of dollars through dominant positions in other companies. Last year, sport made up 95 of the top 100 most watched shows on TV.
“It’s difficult to compete with companies that don’t play by the same financial rules,” said Bob Iger, former chief executive officer and chairman of the Walt Disney Company, which controls ESPN, referring to the bankrolls of tech companies.
The NFL Sunday Ticket package – which shows out of print Sunday NFL games not shown on local television – is available because DirecTV decided not to offer. It’s lost up to $500 million annually to the pack, although it’s also benefited from a reliable base of around 2 million subscribers.
According to a dozen people from the sports, media and technology industries, Apple is considered the front runner. However, a definitive deal has been delayed by negotiations for a simultaneous sale of NFL media assets, including the NFL Network, the RedZone channel and NFL+, a new subscription service offering access to live games on mobile devices.
Apple has made winning the package a priority. Apple chief executive Tim Cook has met with league officials and influential team owners like Jerry Jones, owner of the Dallas Cowboys, and the Kraft family, who own the New England Patriots, according to three people familiar with the process. Apple declined to comment.
Still, Amazon, ESPN+, and YouTube, which reviewed a 2014 bid for the rights, remain on the hunt, some of these people said. NFL chief media and business officer Brian Rolapp said in a statement that the league expects to finalize a deal in the coming months. “A number of companies are in a strong position to potentially land Sunday Ticket, but we still have a long way to go in the process,” added Mr Rolapp.
Some details of the negotiations were previously reported by SportsBusiness Journal.
Fans will still be able to access all games on Sunday regardless of who wins the rights, but they will likely pay a premium to add the service to their Apple, Amazon, ESPN+ or YouTube service, some of those said dozen people. It’s not yet clear if that bounty would be more or less than the $294 DirecTV charges for a year, they added.
Apple and Amazon are trying to position themselves for a wireless future. According to MoffettNathanson, an investment firm that tracks the industry, traditional pay-TV has lost a quarter of its subscribers — about 25 million households — since 2015 as people traded cable bundles for apps like Netflix and Hulu.
But the price of live sports rights is only expected to go up. The biggest media companies, including Disney, Comcast, Paramount and Fox, are expected to spend a combined $24.2 billion on rights in 2024, almost double what they did a decade ago, according to MoffettNathanson.
The fragmentation of a decades-old distribution model has created an opportunity for Apple and Amazon. The companies are looking to expand deeper into the media space by selling subscriptions to Apple TV+ and Amazon Prime. Not only do these services contain their own exclusive shows and sports, but they also serve as portals that sell additional streaming offerings like Starz and HBO Max, which pay Apple and Amazon 15 percent or more of each subscription sold.
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 sport is the strongest media attraction. Companies may be willing to lose money on Sunday Ticket to introduce new customers to other areas of their business, the same calculation DirecTV has made in the past.
The challenge for Apple and Amazon is convincing somewhat skeptical sports leagues that they can produce high-quality broadcasts, flawlessly stream games to millions of simultaneous viewers, and get sports fans used to switching between games with a remote control — without switching to a new one app to navigate .
Her interest marks a breakthrough into the streaming industry. For years, many executives agreed with Netflix CEO Reed Hastings, who said his company wasn’t interested in sports or news because they’re only watched live once and never watched again.
But many streaming companies are reconsidering as competition for subscribers intensifies, share prices have fallen, and profitability remains — for many — unattainable.
Her newfound interest in the sport was evident last Monday during the MLB Home Run Derby at Dodger Stadium in Los Angeles, where executives from Apple, Amazon, Google and Facebook clashed with sports leaders and crashed a party historically by the television industry was monopolized.
Tech dominance in live esports is not a foregone conclusion. Many of the most coveted rights are signed to broadcasters for a decade or more. The leagues have preferred to sell tertiary packages to streamers, reluctant to entrust them with marquee properties like “Sunday Night Football” as traditional television still offers the largest audience.
Reaching large audiences is critical for leagues looking to court the widest possible fanbase to ensure the long-term viability of their sport.
“The death knell of the cable bundle is largely overdone,” said Gerry Cardinale, the founder and managing partner of Redbird Capital, which has made many investments in sports media. “It’s the best place to offer as many sports as possible from a single source.”
Apple launched its $4.99 streaming service, Apple TV+, in 2019 and has an estimated 16.3 million paying subscribers in the United States, according to Antenna, an analytics company for video-on-demand services. Amazon claims to have more than 200 million subscribers to Amazon Prime, which started out in 2006 primarily as a fast shipping service and later added on-demand movies. Today, some customers pay as little as $8.99 per month to access Prime Video.
Tech companies were willing to pay a premium to add sports to their services. Last 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. In addition, approximately $85 million was allocated 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 the previous deal with Fox. The company also bid more than $100 million a year for rights to Formula 1 racing in the United States in a deal it lost to ESPN, which renewed the rights for $75 million, according to SportsBusiness Journal 15x increase over the previous contract.
However, for all their disruptive potential, Apple and Amazon have yet to win a marquee rights package in the United States. That’s reminiscent of 20 years ago, when sports leagues feared they would lose viewers by moving games from network TV to cable. But the change gradually became the norm.
Traditional TV companies are trying to fend off Apple and Amazon by launching their own streaming subscription services. Last year, Comcast, which owns NBCUniversal, shut down NBC Sports Network to boost its US channel and encourage people to pay for Peacock, which exclusively broadcast some English Premier League football matches. Similarly, ESPN has contracted with the National Hockey League to televise some games on their ESPN+ service, and CBS has shown marquee football games on Paramount+.
But these services have only a fraction of the more than 100 million cable subscribers that media companies once reached. As a result, the majority of sports programming goes to traditional pay-TV channels, where they can guarantee leagues and advertisers a larger audience.
The National Basketball Association will be the first major test of the new competitive landscape. The agreements with ESPN and Turner will run through the 2024-25 season. Most sports and media executives predict the league will stick with traditional broadcasters for most of its games while taking a small slice of the rights to a tech company.
“It future-proofs them and brings the product to new audiences,” said George Pyne, founder of sports private equity firm Bruin Capital and former NASCAR chief operating officer. “They can continue to have a long-term relationship with network partners but engage with new media.”
Until then, Apple and Amazon’s best opportunities could be overseas — where Amazon has been active for years — because The European football leagues resell their rights every two to three years. Amazon recently acquired the rights to Europe’s top tournament, the UEFA Champions League, in the UK, Germany and Italy. It also has rights to the French Ligue 1, which it offers to Prime Video subscribers for an annual fee of around $90, and the English Premier League.
Media companies are being pressured to expand geographically to compete, said Daniel Cohen, who heads global media legal advice for sports agency Octagon. TV networks could also join forces to pool their financial firepower, or buy each other to compete with tech giants willing to pay billions for rights like NFL Sunday Ticket.
“It boils down to a Silicon Valley ego thing,” Mr. Cohen said of the lucrative NFL deal. “I don’t see a path to profitability. I see a path to victory.”