Here's a question: would you pay $830 each season for NFL Sunday Ticket?
Because if not, Google's YouTube would lose money on it.
That, at least, was according to some quick math run by The Ankler's Sean McNulty based on the $2.5 billion the league sought in negotiations for the package (he'll rejoin us with the latest today). The Wall Street Journal is now reporting YouTube paid closer to $2 billion. So the breakeven, if YouTube reaches the two million subscribers that DirecTV had, would be more like $664 per subscriber, let's say.
Point being, DirecTV never charged enough to make money on the package, which offers you all the NFL games every week. They currently charge just $300 for it ($400 for the version with extra content). The Journal reports they lost about half a billion dollars on it annually--and they only paid $1.5 billion per season.
Nor did it stem the massive loss of subscribers from DirecTV over the years. Five years ago they had more than 20 million customers; now, that figure has dwindled to 13.5 million, the Journal notes. But YouTube, obviously, is hoping to have the opposite experience.
And it just might work; by one rough estimate, if YouTube boosts Sunday Ticket subscribers to three million, charges $350 per season, gets 1.6 million new YouTube TV subscribers (on top of the 5 million they have right now), and doubles its average revenue per user to $30 as a result, they could make half a billion dollars every year at the $2 billion price tag.
Maybe. But at the same time, YouTube needs eyeballs and subscribers right now to help pitch advertisers on the platform; their ad revenue dropped almost 2% last quarter, the first year-on-year decline since they began reporting the metric for YouTube in 2020, as the Journal points out.
So, are we entering a new era where deep-pocketed tech giants (Google has more than $100 billion cash on hand) will simply keep escalating the prices paid for sports rights, enriching teams and leagues? Or are we actually exiting it? CNBC's Alex Sherman just reported that the cost of sports rights could be peaking, according to his sources. The NBA package is the last major one coming up for grabs soon, and after that, things could quiet down substantially, as Sherman told us last week.
Legacy cable TV could "be totally eliminated" within five to seven years, Sherman reported, leaving many fewer bidders for sports rights (a handful of tech and media giants), and "dropping the price for sports across the board." The loss of legacy cable also means the loss of huge potential audiences; as sports content goes more a la carte, the audiences will be smaller and more niche. What they're willing to pay remains an open question.
If that's true, it will have huge implications. Sports globally are seen as recession-proof, although the U.K. has already seen that wobble some after a disappointing auction for Premier League rights in 2018. Prices paid for teams meanwhile keep soaring, as we saw with Mat Ishbein's $4 billion purchase of the Phoenix Suns this week. (Ishbein, the CEO of United Wholesale Mortgage, has been a familiar name on our show.)
So again, how much would you pay to watch NFL Sunday Ticket? Or NBA League Pass, or future cornhole tournaments? The answer to that is the answer to pretty much everything.
See you at 1 p.m!
Kelly
P.S. As Sportico has reported, Amazon's first 12 "Thursday Night Football" games saw the audience down 25% to below 10 million viewers, compared with last year, when the games were on legacy TV. "The overall reach may not justify" Amazon's reported $1.2 billion cost per year for the rights, Sportico reported. But I did have a great time at the Jets-Jaguars game last night reuniting with TNF's fabulous Kaylee Hartung (more in my Stories!).
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