Amazon, Google, and the NFL
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“We really focus on: how do we reach more fans?”


In March 2021, Amazon made a historic announcement: the tech giant had secured exclusive rights for Thursday Night Football (TNF), which would be distributed to tens of millions of Amazon Prime members in the U.S. through the Prime Video app (OTT). The deal, which was amended a few months later to include the 2022 season, came at a cost of ~$1 billion per year (an increase of ~50% from the ~$660 million Fox was paying for the package).

The final Thursday night game of the 2022 season took place at the end of December, with the Cowboys beating the Titans by two touchdowns. With the inaugural season of Amazon’s TNF deal in the books, I think it’s worthwhile to examine the early results (the distribution of sports rights is a relevant topic for a few companies in the portfolio, including Disney, Comcast, and Netflix).

According to Nielsen, the 2022 TNF slate averaged 9.6 million viewers per game - down more than 40% from the 16.2 million average viewers that the package drew in 2021 on Fox and NFL Network. (For context, CBS, NBC, Fox, and ESPN collectively reported viewership that was roughly comparable to 2021.) Notably, the number of viewers was ~25% below the 12.5 million average viewers that Amazon guaranteed to advertisers. While the overall viewership figures were disappointing, it’s worth noting that certain demographics put up strong results; for example, viewership among adults aged 18 - 34 for TNF averaged 2.11 million, up +11% YoY, which likely speaks to cord cutting in this demo (an important one for the NFL to reach).

While Amazon’s numbers in the first year leave something to be desired (and in my opinion speaks to the challenges that face distributors who do not have an effective way to serve digital and linear sports fans), it’s worth noting that the enthusiasm among tech companies to secure sports rights hasn’t abated: in December, Google announced a seven-year deal worth ~$2 billion per season to secure the rights for NFL Sunday Ticket (out of market regular season games); the reported value implies a nearly 50% price hike from DirecTV’s latest deal (after accounting for the value of the commercial rights for bars and restaurants, which are not included in the YouTube deal).

Under the new agreement, Sunday Ticket will be sold as an add-on to roughly five million YouTube TV subscribers (vMVPD) or as a standalone offering through YouTube Primetime Channels (you can watch movies, TV shows, and live content from other streaming services right in the YouTube app). By definition, Sunday Ticket will now be available to a much wider audience (the tens of millions of U.S. households without DirecTV); that said, it’s an open question whether the addressable audience is significantly larger than what it appears to be today (people who are willing to pay ~$300 per season to access out of market games). On that point, I’ve seen media reports that suggest YouTube will be somewhat constricted on pricing; that is due to the NFL’s contracts with its other media partners, most notably CBS and Fox, which have structured agreements to protect the value of their (expensive) distribution rights in the Sunday window (games at 1pm ET and 4pm ET).

What is Google’s (YouTube’s) rationale for acquiring these rights?

On its face, the (direct) economics of Sunday Ticket have been, and likely will continue to be, tough to justify. It’s been reported that Sunday Ticket through DirecTV had ~2 million subscribers, good for ~$600 million in revenues; in addition, while DirecTV had some access to the advertising slots in those broadcasts, it was limited (CBS and Fox retain the national ad slots for those games). Simply put, it’s quite clear that DirecTV was losing real money on Sunday Ticket. (“DirecTV has been losing around $500 million annually on it for several years, people familiar with the financials said”). With the price tag increasing by another ~$700 million after accounting for the value of the commercial rights, it’s safe to assume a similar outcome for Google unless there’s a material change in the underlying assumptions (in rough numbers, the retail subscriber base would need to increase 3x - 4x). But that’s only accounting for the direct economics on the deal; a more likely answer, in my opinion, is Google expects ancillary benefits from this agreement, most notably as it relates to making YouTube a destination for people to broadly consume user generated content (UGC) and traditional / high-quality TV programming (through the vMVPD and YouTube Primetime Channels).

(End Of Preview)

Brett Schafer's avatar
Great stuff, as always. Google has big long-term ambitions for YouTube. Do you think they are the number one threat to $NFLX and $DIS now?
The Science of Hitting's avatar
@ccm_brett Yes, I think YT is becoming a bigger threat for NFLX / DIS. Becoming clear that they have ambitions beyond the "core" platform / use case. I honestly wouldn't be surprised if they announced a return to original content.

We'll see...
Rihard Jarc's avatar
Sports...never dies.

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