Football fans still don’t know where they can watch all the out-of-market games next season, but it probably won’t be shown Appleit is (AAPL -2.38%) streaming service.
The tech giant was once seen as the leading contender to land the National Football League’s Sunday Ticket package, but negotiations have reportedly gone quiet after Apple failed to see the logic of paying billions for the rights. The NFL is looking to bundle the service with its NFL Network and NFL Redzone channels, which certainly makes more sense with a traditional pay-TV distributor, not Apple.
Apple’s decision to pull out of negotiations as the package became bloated and it couldn’t get exactly what it wanted shows discipline. At the same time, he leaves the door open to Amazon (AMZN -3.43%) and Alphabetit is (GOOG -2.21%) (GOOGL -2.03%) Google to make a deal.
Apple is already spending a lot on Apple TV+
Apple’s streaming content budget is absolutely huge, even compared to some of the legacy media companies getting into streaming.
Apple is slowly building up a good-sized library of original movies and series that have garnered a lot of interest from viewers and critics. It has already won the Best Picture Oscar and numerous Emmy Awards.
Apple mainly focuses on developing prestige films and series with big name talent and high production value. Despite its relatively small library of titles, its production budget adds up quickly. Wells Fargo analysts expected Apple to spend around $8 billion on content in early 2022. Alone disneyAmazon and netflix spent more on streaming video This year.
Apple also signed a deal with Major League Soccer earlier this year, agreeing to pay a minimum of $250 million a year for the rights to every game in the league. It will, however, require subscribers to pay more to access these games. He reportedly pondered the idea of including Sunday Ticket as part of the standard Apple TV+ subscription, which the NFL opposed.
Additionally, Apple continues to increase the number of series it greenlights as the rest of the industry retreats from content production for focus on profitability. The only other company developing more series in the second half of 2022 than it did in 2021 is Amazon. If this trend continues, Apple will have more opportunities to develop better programming than its competitors, and the Sunday Ticket rights won’t be as valuable, relatively speaking, to the service.
In short, Apple has better things to spend on its already massive streaming budget than NFL rights. Investors should applaud the discipline with which Apple walks away from negotiations when it can’t get exactly what it wants. It refocuses its budget on content that better fits its platform and retains its value longer. The move could help push the Apple TV+ service to black, becoming a valuable part of its increasingly important service segment.
The NFL makes more sense elsewhere
Apple has always been an odd choice for the NFL Sunday Ticket package. The league had no pre-existing relationship with the company, which is part of why it wanted to sell the rights to the tech giant. But for the way Apple has configured its streaming serviceit doesn’t make much sense.
Sunday Ticket makes a lot more sense on Amazon Prime or Google’s YouTube. Amazon owns exclusive rights to Thursday Night Football in the US and has effectively used those games to recruit new Prime members and sell advertising. Positioning Sunday Ticket as a complement to Prime subscriptions could bolster the valuable subscription service while improving subscriber retention in retail’s most important quarter.
YouTube, meanwhile, has built the largest virtual pay-TV service in the United States. With over 5 million subscribers, however, it’s still relatively small compared to the big cable companies. Google could easily copy the old Sunday Ticket model, using it as a loss leader to sell more pay-TV subscriptions. This would open the door to more advertising revenue for YouTube and a better position in negotiating carriage fees with cable networks.
Either company can probably extract more value from the Sunday Ticket than Apple, and it doesn’t make sense for Apple to try to outbid either, even if it has the money to do so.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Adam Levy has positions at Alphabet, Amazon.com, Apple, Netflix and Walt Disney. The Motley Fool occupies and recommends Alphabet, Amazon.com, Apple, Netflix and Walt Disney. The Motley Fool recommends the following options: January 2024 Long Calls at $145 on Walt Disney, March 2023 Long Calls at $120 on Apple, January 2024 Short Calls at $155 on Walt Disney and March 2023 Short Calls at 130 $ on Apple. The Motley Fool has a disclosure policy.
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