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the apple of roger's eye

Apple has been rumored, or more likely expected, to change television for at least the last decade. Since Steve Jobs famously remarked “I finally cracked it” almost one decade ago in October 2011, the world has been waiting to see what how this plays out.

In July 2021, it is rumored that Apple will purchase rights to one of live television’s last marquee properties, NFL Sunday Ticket.

Is Apple’s shopping spree all it is cracked up to be?

Sitting On The Sidelines

Among the biggest turning points in professional football was when Drew Bledsoe took a hard hit from New York Jet Mo Lewis and had to leave a Patriots game in the second week of the 2001 NFL season. This allowed 6th-round draft pick, Tom Brady, into the game, and 20 years later Tom Brady has 10 Super Bowl appearances and seven wins. Also, on the sidelines in 2001 was what is now the world’s most valuable company, at least at the time of writing, Apple Computer. In May of that year, Steve Jobs announced that Apple would be opening Apple Stores across America, its first store in McLean Virginia. Today, there are over 500 Apple Stores, which are among the most profitable stores per-square-foot in the world. Apple opened its newest store in Los Angeles on Broadway in the spectacular renovated Tower theater building.

It is surprising, however, that Apple is still on the sidelines with respect to TV, making the occasional first down[MOU1], but no real red-zone conversions.

Reaching For The Forbidden Fruit

Arguably the most important Hollywood event of the year is the Allen & Company Sun Valley Conference, which has been ongoing each July since 1983. Schmoozing is done, deals are discussed, and billionaires debate the effects of G-force on their skin, all while enjoying the great outdoors. In the 2021 version of Summer Camp for Billionaires (after a one-year COVID-19 hiatus), it was widely reported that the NFL reached out to Apple about NFL Sunday Ticket. One can imagine Roger Goodell maneuvering his way around the tennis court to get close to Tim Cook if only to float this opportunity.

However, it is unlikely this was the first shot of Goodell’s arrow at the Apple. A little over one year ago, Cook hired Jim DeLorenzo away from Amazon to lead its sports division for Apple TV. Amazon, of course, made headlines in 2016 with the acquisition of non-exclusive streaming rights for 10 NFL broadcasts in the 2017 season.

The Roots Of NFL Sunday Ticket

Launched in 1994, NFL Sunday Ticket was broadcast on DirecTV as a way to get out of local-market games to its subscribers. DirecTV pays roughly $1.5 billion each year for these rights and has been a key part of the NFL marketing for many years. In fact, AT&T had given itself an out on the acquisition if DirecTV lost the Sunday Ticket deal.

Banished From Eden

Purchased by AT&T in 2015 for $48.5 billion, AT&T had high hopes that the NFL would help create a super bundle of AT&T products and drive future growth. At the time of the acquisition, DirecTV was gaining subscriptions, adding 214,000 in the fourth quarter, with nearly 20-million paying subscribers in all. The acquisition was largely intended to offset AT&T U-verse declines. However, by 2019 AT&T was quietly allowing non-subscribers to stream Sunday Ticket, and by 2021 entered a deal to spin off DirecTV to private equity firm TPG for just over $16 billion, a staggering fumble of around $30 billion of enterprise value. Over the six years, DirecTV lost almost seven million subs, over three million in 2020 alone. Clearly, NFL Sunday Ticket was no longer the Hail-Mary pass it once was.

Media As A Loss Leader Before You Amazon!

It is important to remember what buying these rights did for Rupert Murdoch’s Fox. In December 1993, Murdoch wrote a check for $1.3 billion to the NFL for rights to air games on Fox. Murdoch had twice tried to buy rights and had been rebuffed, or “used” as leverage against the old networks. Additionally, at the time, Fox was not respected as a serious network, derisively called “the coat-hanger network.”

Other than the Simpsons and the X-Files, Fox had little A-level content. However, the key learning from Fox’s bet on the NFL was not that they would make money on the rights, but that they would make money on the business around those rights.

If this sounds similar to Jeff Bezos’s comment “When we win a Golden Globe, it helps us sell more shoes,” trust your instincts.

A Is Also For Alphabet

AllThingsD reported back in August 2013 that YouTube had approached the NFL about broadcasting NFL on YouTube. This was the time when Google was launching Chromecast (which should have been Roku but wasn’t) and the NFL would have been great content to push sales of the streaming stick. Even at that time, it was felt that “if Apple was serious about television, adding NFL is a no-brainer.” Apparently, this was a brainer, and the NFL was not added to Apple’s TV offerings. Apple was airing other major sports on Apple TV, but the marquee product, NFL, was not on the marquee streaming device (Apple TV) at that time.

YouTube pursued a different path and chose America’s favorite pastime (however the World Series is about 1/5 of the Super Bowls’ total of ~100M viewership)YouTube and MLB recently announced a renewal of their global pact for live games, the third season of their alliance.

But Wait, There Is A Mouse (and Minion, Rocket Ship, And An Ex-GF)

Even before Billionaire’s summer camp, NFL Sunday Ticket was being considered by other suitors. Bob Chapek, CEO of the Walt Disney Company, said in May that Disney was considering licensing NFL Sunday Ticket. Chapek did qualify the interest, stating that it needs to “add shareholder value.” In August, ESPN+ will raise its monthly prices to $6.99 per month, right before pro football starts in the fall.

Additional suitors are all the usual suspects. Comcast needs to bolster Peacock with the Olympics looking dicey due to CV19 issues such as no spectators, and muted medal celebrations among others. However, NBCUniversal has an expanded client list (20% higher than Rio) and expects to ultimately surpass Rio’s $1.25B in ad sales (source). Should the viewers not show up, Comcast will be stuck with an epic amount of “make-dos” with their advertisers, time will tell.

Others include Amazon which could to its expanded exclusive Thursday Night Football (source) rights, and even DirecTV to potentially retain broadcast rights, as streaming rights could be sold separately.

Should Tim Take A Bite?

Steve Jobs, with his bold personality, was not one to sit on the sidelines. Tim Cook, more reserved than a risk-taker, has been called better at running Apple than his predecessor. Apple was the world’s first trillion-dollar company (whereas when Jobs passed the split-adjusted value was around $300B). Now Apple is a $2-trillion company, still without the big success (or simple respect) in entertainment that peers such as Amazon and Netflix enjoy.

Acquiring NFL Sunday Ticket would bring live viewers to Apple TV+ and increase engagement with the Apple brand. Already under fire from the government over potential monopoly issues surrounding fees charged in the app store, Apple may need a new way to have consumers engage with its devices should any government ruling not go in its favor. Additionally, the fight over privacy (Apple touting its opt-in strategy vs. others' opt-out) could be won by Apple, thus gaining more direct consumer relationships with NFL Sunday Ticket, without the need to track data as competitors do.

Keeping up with the Bezo-es

Although in the running for NFL football rights, in the competition for best in space” bragging rights, Apple remains on the sidelines. Cook is letting the other three (Branson, Bezos, and Musk), battle over who rules the universe while focused on running Apple down here on the third rock from the sun.

The investment other tech firms (Amazon, Twitter, and YouTube, in particular) have put into licensing live sports is also unlikely to force Apple into a move for which it is unprepared.

Parting Thoughts

Apple hiring DeLorenzo away from Amazon signifies a well-thought strategy from Cook as to licensing sports for streaming. It will be interesting to see the jockeying over these rights in the next few months before the DirecTV contract runs out.

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